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A New Game Awaits
Digital fluency and a thirst for convenience are making the UK’s borrowers more capricious and cost-sensitive than ever, says Richard Carter, Managing Director, Equiniti Credit Services, in this collection of predictions for 2018. Interest rate rises, and new regulations will add fuel to this fire next year, and lenders that can’t keep up will get burned.
1) Lowest price wins
In the digitised age of credit price comparison sites, brand loyalty equals bought loyalty. In 2018, lenders must earn their custom by delivering market-beating products. As interest rates continue to rise, the lenders that can drive down the cost of credit stand to prosper the most. Simply reducing margins, however, makes little business sense. But in a rising market there is a balance to be struck between protecting profit and increasing sales. Some may be willing to take a short term hit to capitalise on the rising market conditions, taking the view that volume sales justify smaller margins.
Adoption of automated and agile credit technologies will help lenders to drive down costs, reducing time-to-revenue for new products and enabling savings to be passed on to the customer in the form of more competitive rates.
2) Lenders adjust to curbing enthusiasm
The rise in interest rates are also likely to have a knock-on effect on what borrowers use credit for.
Recent research from Equiniti Credit Services indicates that borrowers’ use of credit is split equally between funding aspirational items such as cars and holidays, and managing existing debt. To offset rising rates, 2018 will see lenders adjust their standard payment terms, allowing monthly repayments to remain consistent. It remains to be seen whether credit will continue to fund aspirational items at the same rate, especially since the falling pound has already drive up the cost of foreign travel and overseas goods considerably.