On the occasion of the 10th anniversary of its establishment the consumer lending company UniCredit Consumer Financing presents 10 trends on the consumer loans market since 2006 until today.
Financial services have changed in the past 10 years. The digitalization of banking services already requires agility in lending and an individual approach to every client.
10 years ago sales of consumer loans via alternative channels did not exist, and now banking is inconceivable without them.
The planned expenses in greater amounts (renovation, holiday, purchase of a car, a residential property, etc.) are the main prerequisites for the consumers to seek financing by their bank.
Clients do not want to postpone their projects and look for affordable ways to finance them, however, there is a number of factors, on the basis of which a decision for lending is made.
These key factors are both the price and service level, and the accessibility of the product, the easy application procedure and the time necessary for concluding the deal.
Being the best-known and most frequently used product on the highly competitive market, the offers for consumer loans have similar terms and conditions.
In 2016, 86% of the consumer loans market in Bulgaria is centered around 7 banks. In addition, the number of the registered financial institutions is still increasing, and in June 2016 they are 174, while the number of banks and branches of international banks remains stable at 27. (source BNB).
These and a number of new trends were outlined by UniCredit Bulbank’s consumer lending company UniCredit Consumer Financing in an analysis of the consumer lending market in the last 10 years. The analysis contains interesting data and figures and explains the trends formed on the lending market.
Consumer loans remain the most popular product in lending.
Consumer loans are the most common and widely-used credit products, provided by banking and non-banking financial institutions and covering a wide range of consumer needs. Since 2006 the main reasons for taking consumers loans have remained the same.
Bulgarian consumers usually use the withdrawn sums for renovation of their residential property and furniture, for the purchase of a second-hand car or re-financing of a current liability.
Observed trend: Re-financing of current liabilities is done more frequently through a new consumer credit
Offering more products for re-financing of current liabilities is a new trend on the consumer loans market. This is not by chance and it meets the greater demand from the consumers. Clients are looking for re-financing offers in order to combine their liabilities and pay one instead of several monthly installments (very often in different banks or financial institutions), and because of the better financial terms, which they can receive with the special offers, if they re-finance or combine their liabilities. In 2015 over 50% of all credits are aimed at partial or complete re-payment of the liabilities.
Observed trend: A reason for taking consumer loan - complementary payment for a purchase of a real estate
The activity on the real estate market during the previous year increased the demand for financing opportunities. Very often clients use their own money but they use a consumer loan for complementary payment of a real estate or for covering current needs related to it.
Following the mortgage boom in 2006 and 2007 and as a result of the law on their renewal on the tenth year following the signing of the agreement so as to avoid the notary fees and to receive ownership of the property, some clients choose to take a consumer loan, in order to repay forthwith the mortgage. This can happen due to the high amounts of the granted consumer loans (BGN 50,000)
Digitalization of lending
The sale of financial products through alternative channels, such as on-line and mobile applications, has been getting more popular over the recent years.
Expected or not, the boom of the financial services accessible through the Internet, smart phones and mobile applications is a fact. Through them consumers can faster and more easily take loans or purchase goods on lease, make orders, track activity on their account.
Observed trend: Every tenth consumer loan goes through alternative channels
If in 2006 the sales of consumer loans through alternative channels did not exist, today every tenth consumer loan goes through them in particular.
Observed trend: On-line financing of purchases of goods on lease
The development of on-line business and the increase of the number of traders, who offer it, provoked the offering of on-line financing of purchases of goods on lease. In 2016 they are over 7% of the POS loans, granted by UniCredit Consumer Financing.
Directing customers from the branch and the store towards the alternative channels follows the natural tendency of digitalization of the financial services market.
The interest rates of consumer loans now are at the levels before the crisis
After 2007 and 2008 with the beginning of the global economic crisis we have witnessed a rapid increase in the interest rates of consumer loans (from 9.76% in 2007 to 13.48% in 2009).
Following this spike, a trend for gradual decrease is observed and in 2016 the interest rates of the granted consumer loans are back on the levels from 2007-2008. The stabilization of the economic environment stimulates the offering of better terms for the clients and the greater demand for loans.
Levels of the newly granted bank loans
Following the peak of lending in 2007 and 2008 there was a serious decrease of 66%. In 2009 the market barely exceeded BGN 1.7 billion. In comparison, in 2008 the newly granted consumer loans amounted to over BGN 5 billion.
Observed trend: Throughout the following years the market has been gradually recovering
The insurance, an integral part of the offered financial service
While in 2006 the offering of insurance along with the financial products was rather rare and was offered by only a few financial institutions, today clients themselves seek the security it provides and drive its even greater supply on the market.
Observed trend: Loan insurance policies have different coverage, ranging from protection of borrowers in cases of disability, unemployment or death to protection of the purchased goods from theft or damages.
POS lending has been growing at a stable pace every year.
Consumers themselves are looking for opportunities for purchases on lease, which is due to the accessibility of the product and the comfort in payment of the amount in affordable monthly installments. In this way even the unexpected necessary purchases are more affordable and present the client with the opportunity to choose and to receive higher quality. The average duration of POS loans has not changed drastically throughout the last ten years. Until 2011 it was around 15 months, and since 2012 it has been 13 months. There is no significant change in the average ticket, either - for the last five years is has not exceeded BGN 750.
Observed trend: For the last five years the average duration of POS loans is 13 months and the average ticket is around BGN 750.
Observed trend: For the last couple of years (since 2011) a promotional offer has been offered on the POS loans market. - 0% interest. This is one of the most popular opportunities for the purchase of goods on lease; in 2015 and the current 2016 every tenth loan is granted with 0% interest.
The smart phone is the most popular product on lease for 2015 and the current 2016
Until now, just like in 2015, smart phones are the most popular products on lease. The services and applications, which can be used through the smart devices are becoming more and more accessible, which explains the great demand and supply of this product.
Observed trend: Smart phones have displaced the other goods.
Due to the price (an average of BGN 600) consumers are taking advantage of the opportunity to purchase them on lease. Unlike them, tablets were among the most desired products by clients in 2013 and 2014 only, reaching the sixth position, but in 2016 they are on the verge of dropping out from the top ten.
We can summarize that, without significant changes in the ranking for the last ten years, the goods which clients seek to purchase on lease are smart phones, TV sets, laptops, furniture and white goods.
More information for media:
UniCredit Bulbank, Identity & Communications Department
Viktoria Blajeva, Phone: + 359 2 9264 993, wjlj/ebwjepwbAvojdsfejuhspvq/ch
Mara Bareva, Phone: +359 2 9264 963 , nbsb/cbsfwbAvojdsfejuhspvq/ch
Beatris Nikolova, Phone: +359 2 9232 528, cfbusjt/ojlpmpwbAvojdsfejuhspvq/ch