About UK Credit Reference Agency Services Market Insight Report 2016
In this report Apex Insight reviews the UK credit reference agency services market. In doing this, we:
– Evaluate the size of the market for these services and its likely growth rate,
– Identify and analyse the companies which carry them out
– Probe their strategies including the development of consumer services and of a range of other services in adjacent markets
We also explore the drivers of demand for credit reference services and analyse how they have trended. Key drivers include
– Overall levels of consumer borrowing
– The housing market and mortgage lending
– Other consumer finance including credit cards and car finance
– Other contracts taken out by consumers for services including mobile and fixed line phones, utilities and insurance.
Credit reference agencies (CRAs) provide a range of financial data on consumers to support lenders in assessing the creditworthiness of potential borrowers and hence in making lending decisions. The core customers of CRAs are businesses which offer any form of credit to consumers including banks, finance houses, credit card issuers, mortgage lenders, utilities, phone networks and insurance companies. CRAs do not make the actual lending decisions on behalf of these organisations; this is done by their customers using the information they provide as an input.
There are three main CRAs operating in the UK – CallCredit, Equifax and Experian – as well as a smaller firm, Lendprotect.
– A second smaller operator, TeletrackUK, withdrew from the market at the end of 2015.
– The three main firms have a broad market focus while Lendprotect has, and TeletrackUK had, a specialisation in covering sub-prime borrowers.
– The smaller of the three leaders, CallCredit, has gained significant market share in recent years
In recent years, most CRAs have developed additional services alongside their core credit scoring activity. These include selling access to their own credit files to consumers. Other services offered by CRAs (which are not covered by this report) tend to leverage either of both of their data assets or systems expertise. Examples include:
– Marketing information and services (CallCredit, Equifax, Experian) to give corporates a better understanding of their customers
– Debt collection services and platforms (such as TDX, recently acquired by Equifax)
– Internet security (Equifax)
Market size and growth
The combined CRA revenues of the companies operating in the market exceeded £300m in 2014. Growth has picked up since 2010, with the market having been relatively static during the credit crunch and the downturn which followed. Growth of the overall revenues of the leading CRA providers has been faster than that of the market as they have obtained add-on growth from the launch and roll-out of other services. Demand for CRA services is driven by the number of applications for credit. The main users of the services are:
– Financial institutions such as banks, mortgage lenders, credit card issuers, consumer finance companies and car finance providers. o Insurance companies who offer monthly payment
– Mobile phone service providers
– Utilities and TV service providers
– Retailers issuing store cards and selling via catalogues
Increased demand for credit will increase their need for CRA services. However, there is not likely to be a direct relationship as the way that customers pay for the services is likely to involve bulk subscriptions rather than a pay-per-credit-check basis. Nevertheless, we believe that increased demand for credit is likely to correlate with CRA market growth. Forecasts suggest that provision of credit by the users of CRA services will increase. However, the EU referendum has created significant uncertainty regarding the rate of growth.
What are the objectives of this report?
Credit reference agencies play a key role in our consumer finance infrastructure, helping to decide who is considered suitable for credit and who is not and, hence, overall lending volumes. To do this, they make extensive use of advances in data gathering and analysis to improve the reliability of their assessment methods. This report aims to shed light on the credit reference agency services market, explore how it has performed and set out how it might be likely to trend in the future.
What are the sources and methodology?
This report is based on:
– Extensive research into published industry sources
– In-depth analysis of the macroeconomic environment and relevant market drivers
– Financial analysis of the accounts of companies in the industry
Information from these sources has been synthesised and presented clearly and concisely with extensive use of charts and tables to illuminate points and support conclusions