CCR2 Technology A need to know basis
What do short-term lenders need to know about their new obligations to use price-comparison websites?
Tony Gundersen UK country manager, Ferratum UK
From 26 May 2017, all short-term lenders in the UK with an online presence must publish at least one of their products via a price-comparison website as part of the CMA’s Payday Lending Market Investigation Order 2015. Although a lot of preparation has been
required to comply with this order, it is a welcome move for borrowers and lenders to increase transparency within the market and create a level playing field for consumers.
The benefits There is a clear opportunity here for smaller lenders to have products featured alongside the big players on price-comparison websites. Our market has, historically, been weighted in favour of better-known brands, who have been able to capitalise on advertising. Whilst lesser-known lenders may have previously been offering more competitive rates, it is only now that consumers are able to directly compare lenders against one another. From a borrower’s perspective, this order
will make it easier to compare the best deals and as a result, save money. It has been difficult in the past to shop around for short- term loans, as the information regarding the different types and loan amounts is not easily available. Now, however, borrowers will be able to choose the lender, and the product, which best suits their needs.
Choosing the product Many short-term lenders currently offer a classic ‘payday’ loan product, alongside an instalment loan that is increasingly popular. Most comparison sites can feature both of these products on a dedicated lender page, as well as in areas dedicated to specific loan types. As many borrowers look to short-term lenders for a cash injection before their next payday, publishing these details via third- party platforms can make it easier for borrowers to find their loan of choice. For larger players, who offer multiple loan products, it is a great advantage to feature a number of products in one place. They may also want to narrow it down to a specific product, however. The key is to consider the popularity of each. If one is significantly more popular with a lender’s customers, it is likely to be popular on a price-comparison website too. Potential customers may not be aware of the variety of products on offer from a particular lender, so these platforms offer lenders a chance to communicate the features of their other loans as well. It is also important for lenders to compare
their own interest rates and loan amount against competitors, both large and small, to ensure that their products are either equal to, or better than, the other lenders on offer in the eyes of a customer.
The website There are already a number of websites that offer comparisons of short-term lenders. ‘Allthelenders’, for example, was the UK’s first independent and completely impartial price comparison website for the payday and short-term loan industry. There are also alternatives dedicated to loans specifically, such as Choose Wisely and Readies. An additional factor to consider is that
borrowers will research the best deals available to them. As not every lender will be listed
July 2017
www.CCRMagazine.co.uk
on every price comparison site, it is crucial for lenders to choose the website which best fits their needs, and which has a similar customer base to their target audience.
Thinking like a borrower The final piece of the puzzle is to consider what customers are looking for in a short- term loan. Will they want flexibility in terms? Will they be put off by hidden costs? Just as these factors are considered when
developing loan products in the first instance, it is important to revisit them again when choosing which products to feature. By publishing details on a price-comparison website, lenders are opening their products up to a far wider audience, and, therefore, appealing to all consumers as much as possible is vital. As in any business, lenders want to encourage customer loyalty from both existing and potential customers. This new CMA order is a positive step
forward for the short-term loan industry. Not only does it encourage market competition and increase the potential customer pool for lenders, it also allows borrowers to shop around and find the best deal to suit their immediate financial needs. As more and more short-term loans become available on these platforms, lenders will need to consider how to convert one-off borrowers into loyal customers. CCR2
As not every lender will be listed on every price comparison site, it is crucial for lenders to choose the website which best fits their needs, and which has a similar customer base to their target audience
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