UK Credit Reference Agency Services Market Insight Report 2016

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Published: July 2016
Pages: 32
Format: PDF

 

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Description

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.

 

Summary

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.

 

Leading operators

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

About this report 2
What does the report contain? 2
What are the objectives of this report? 2
Who is it useful for? 2
What are the sources and methodology? 2

Summary 3

Background 3
Leading operators 3
Market size and growth 3
Drivers 3
Outlook 3

About Apex Insight 4
Company background 4
Consulting services 4
Custom market analysis 4
Commercial / operational due diligence 4
Primary research 4
Growth strategy 4
Related research 4
Research subscriptions 4

Contents 5
List of charts and tables 7

Credit Reference Agency Services Market 8
Description 8
CRAs serve those who provide credit 8
They gather a range or personal and financial data 8
Competitive Landscape 9
UK CRAs 9
Company revenues have grown 9
Each of the main three is present across market segments 9
The main three providers offer consumers the ability to review their own credit files 10
Industry margins are healthy 11

CallCredit 13

History 13
Ownership 13
Locations 13
Performance 13
Strategy 13

Equifax 15
History 15
Locations 15
Ownership 15
Performance 15
Strategy 15

Experian 16
History 16
Locations 16
Ownership 16
Performance 16

LendProtectUK 17

TeletrackUK 18
History 18

Market Size & Growth 19
Market size 19
Growth 19

Market Drivers 20
UK population has increased 21
The UK economy has made a recovery 21
Consumer borrowing, which stagnated after the credit crunch, has increased in the last couple of years 22
Housing transactions and new mortgage advances have been a key driver of the overall borrowing trend 22
Credit cards numbers have fallen, but card fraud has increased 23
Car finance purchases have increased as car sales have boomed 24
Telephones, utilities and insurance are also likely to have driven further increases in demand for credit checking 25

Forecasts 27

Drivers 27
UK population is forecast to continue to increase at a similar rate 27
GDP forecasts have been scaled back since the referendum result 28 Consumer credit had been expected to increase in a growing economy 28 Housing transactions are forecast to continue at close to recent levels 29
Car finance transactions are also expected to increase 29
CRA Market 30
Risks to the forecast 31

List of charts and tables

CRA revenue by company / £m 9
Number of customer relationships held by leading CRAs, by segment 10 Penetration of leading CRAs by segment / % 10
Gross margin trends 11
Pre-tax margin trends 12
Revenue per employee trends / £m 12
CallCredit Limited summary financials 13
Equifax Limited summary financials 15
Experian Limited summary financials 16
CRA services market size and growth / £m 19
Leading CRA groups – long-term revenue trends / £m 20
UK population / millions 21
UK GDP 21
UK secured and unsecured household debt / £bn 22
Housing transactions per year / ’000 22
New mortgage loan advances / £bn 23
Number of credit cards in issue / m, end of year 23
Fraud losses on UK-issued cards 24
Total advances – value / £bn 24
Total advances – volume / ‘000 25
Mobile phone contract connections / m 25
Residential fixed lines / m 26
UK population / millions 27
UK real GDP / % annual growth 28
UK secured and unsecured household debt / £bn 28
Housing transactions per year / ’000 29
Historical and forecast total advances – value / £bn 29
Historical and forecast total advances – volume ‘000 30
Historical and forecast CRA services market size and growth / £m 30

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