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In Focus Consumer Credit


Pariahs of yesterday and pioneers of today


The short-term lending market has developed a speed and ease that is well in tune with younger customers’ expectations


Russell Hamblin-Boone Chief executive, Consumer Finance Association Russell.hamblin-boone @cfa-uk.co.uk


What does ‘good’ really look like in consumer credit today? This was an important question recently posed by the regulator at an industry roundtable.


There was general agreement that while good is a subjective judgement and open to interpretation, it can be quantified by positive outcomes for consumers.


But that is not the whole picture because, in order to define a positive outcome, we need to understand consumers and their needs, both now and in the future.


Under review


The Financial Conduct Authority (FCA) is reviewing the high-cost credit market, which, although as yet undefined, is usually taken to mean any unsecured credit product that is not available in the same terms from a mainstream bank or building society. It may not be immediately obvious that this description can be applied to a very broad range of consumers; especially to younger people with thin credit files and a minimal financial profile.


Our own research, carried out by the Social Market Foundation, reveals the typical non-standard finance customer is likely to be male, between 25 and 39, earn around £25,000 per year, and be in full- time employment.


Alternative lenders are designing products targeted to meet the needs of this generation of consumers and the generation to come. Labelled by economists and the media as millennials, ‘generation Y’, or ‘generation rent’, many young people are embracing new finance products more closely aligned to their lifestyle.


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Alternative lenders are designing products targeted to meet the needs of this generation of consumers and the generation to come


Disruption


The new era of alternative lending has followed this and resulted in some of the most user-friendly finance products to be developed in decades. The firms disrupting


www.CCRMagazine.co.uk


Consumers have become used to accessing products they need in a matter of moments through the touch of a button. Nearly every task has an app associated with it.


The growth of Uber, Deliveroo, Amazon and even some companies, like Sainsbury’s, offering same-day delivery, have created an expectation for the ‘now generation’.


the mainstream markets use cutting-edge technology, data analytics and behavioural science to design products that match modern lifestyles.


The next generation of consumers will, no doubt, join an increasingly credit-driven economy where homeownership is no longer a realistic aspiration for them. They will have a shorter horizon on which to


plan their lives, and they will also use credit more readily, but in smaller sums over shorter periods.


Their careers will be characterised by short-term contracts, multi-skilled jobs, with many different employers and probably more than one career path.


In light of what we know about the generations to follow, the FCA’s review of high-cost credit must seek to future proof its regulatory framework and promote the kind of innovation that allows lenders to match the expectations of its customers. The payday lender of yesterday is the pioneer of today. CCR


March 2017


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