Personal Lending in Australia 2010

Introduction

The Australian personal loan market is currently growing, after being held back by the uncertainty of the global financial crisis. This report analyzes consumer issues in the personal loan market, including comparisons with the potential substitute that credit cards constitute.
Features and benefits

* The report uses consumer survey data as well as interviews with bank executives.* Provides discussion and analysis of several key issues facing Australian consumer credit lenders.* Analyzes the competition facing the personal loan market from credit cards.* Discusses new developments in the personal loan market.* Includes market share data of the major competitors.
Highlights

Personal loans are medium involvement products, in that customers commonly conduct relatively little or no research into the available providers, but instead go to their main financial institution. Cross-selling has thus traditionally been the dominant method of reaching customers for the major banks.Credit cards are more likely to act as substitutes for personal loans for amounts of A$10,000 and below. Balance transfer offers, which provide an added incentive for consumers to choose credit card debt over personal loans, are forecasted to become more common again in the next 12 months.An important reason for the recent resurgent popularity of personal loans has been the addition of product features usually associated with other products. For example, by adding redraw facilities and allowing more flexible repayment options, personal loans have become flexible in a manner comparable to credit cards.
Your key questions answered

* What are consumers looking for when choosing a personal loan, and how can the target group be better understood?* How has the personal loan market changed over the last year?* How can personal loan products be better tailored to cusotmer needs?* How have market shares and competitor positioning changed over the last year?* What developments are forecasted in the personal loan market and how can they be anticipated?

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TABLE OF CONTENTS
Overview 1
Catalyst 1
Summary 1
Executive Summary 2
Personal loans are growing and evolving 2
Credit cards and personal loans have similarities and differences on several levels 3
The internet promises to change the personal loan market 4
Personal Loans Are Growing and Evolving 9
Consumers are more likely to have a personal loan compared to a year ago 9
The type and purpose of personal loans has changed over the last 12 months 13
Attitudes towards personal loans have shifted 18
Credit Cards and Personal Loans Have Similarities and Differences on Several Levels 23
Consumers choose personal loans over credit cards for several different reasons 23
Cross-selling is more common for personal loans compared to credit cards 26
Hybrid products may become more common 29
The Internet Promises to Change the Personal Loan Market 31
Internet research is becoming more common for a range of financial products 31
Online applications offer advantages in the form of convenience and efficiency 34
The online channel will continue to grow in importance 35
Appendix 39
Data tables 39
Methodology 45
Further reading 46
Ask the analyst 46
Datamonitor consulting 46
Disclaimer 46


TABLE OF FIGURES
Figure 1: Having several personal loans has become more common, 2009–10 10
Figure 2: The most common personal loan is for A$10,000 to A$14,999, 2009–10 11
Figure 3: Half of personal loan holders have held their loan for a year or less, 2010 12
Figure 4: The major banks have increased their market share, 2009–10 13
Figure 5: Secured variable rate loans have become more common, 2009–10 14
Figure 6: Longer-term loans have become less common, 2009–10 15
Figure 7: Shorter-term loans have become more common, 2009–10 16
Figure 8: Vehicle loans have become more common, 2009–10 17
Figure 9: The average monthly cost of a personal loan has increased slightly, 2009–10 18
Figure 10: Pricing has become a more important reason for choosing a loan provider, 2009–10 19
Figure 11: Personal loans have increased flexibility options, 2009–10 20
Figure 12: Application fees have increased slightly, 2009–10 21
Figure 13: Personal loan holders experiencing financial stress are slightly more common, 2009–10 22
Figure 14: Personal loan holders are on average younger than credit card borrowers, 2010 24
Figure 15: Personal loan holders have higher household incomes, 2010 25
Figure 16: Personal loan holders are unlikely to envision trouble paying their bills, 2010 26
Figure 17: Other product holdings factor heavily into personal loan provider choice, 2010 27
Figure 18: Fees are overwhelmingly the most important factor for consumers taking out a credit card, 2010 28
Figure 19: A rising proportion plan on taking out personal loans in the next 12 months, 2009–10 29
Figure 20: Many used no particular source of information when choosing personal loan provider, 2010 32
Figure 21: Consumers are increasingly keen to apply online for personal loans, 2009–10 34
Figure 22: Consumers are positive toward the internet channel, 2010 36
Figure 23: Many consumers would like to apply online for all products, 2010 37

TABLE OF TABLES
Table 1: Online application preferences, 2010 38
Table 2: Proportion of consumers with personal loans, 2009–10 39
Table 3: Initial amount of main personal loan, 2009–10 39
Table 4: Time held main personal loan, 2010 40
Table 5: Provider of main personal loan, 2009–10 40
Table 6: Type of main personal loan, 2009–10 40
Table 7: Term of main personal loan, 2009–10 41
Table 8: Purpose of main personal loan, 2009–10 41
Table 9: Monthly cost of main personal loan, 2009–10 41
Table 10: Reasons for choosing provider of main personal loan, 2009–10 42
Table 11: Features of main personal loan, 2009–10 42
Table 12: Application fee of main personal loan, 2009–10 42
Table 13: Financial stress attitude questions, 2009–10 43
Table 14: Sources of information used when choosing main personal loan, 2010 43
Table 15: Age distribution of customers of credit products, 2009–10 43
Table 16: Household income distribution of customers of credit products, 2009–10 44
Table 17: Likelihood of consumers having trouble paying their bills in next 12 months, 2010 44
Table 18: Reasons for choosing main personal loan provider, 2010 44
Table 19: Proportion planning to take up personal loan in next 12 months, 2009–10 44
Table 20: Important features when choosing credit card provider 45
Table 21: Online applications and preferences, 2009–10 45
Table 22: Online preference and prevalence for different products, 2010 45



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