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New digital opportunities in unsecured lending for UK banks

Traditional lenders must focus on three areas to grow their unsecured lending business.


The UK’s unsecured lending market contracted post-financial crisis. While the sector has experienced a revival since 2012, traditional lenders have been slow to adapt to the demands of a digital marketplace.

With strong backing from private equity firms, tech-savvy payday lenders were quick to exploit this gap. Using technology to make rapid lending decisions, these providers became increasingly dominant from around 2012. Digitally powered decision-making enabled rapid customer acquisition processes and low cost to serve. As a result, payday firms grew fast and reaped attractive returns.

Precisely because the customer acquisition methodology was so quick, customers often failed to understand the terms and conditions linked to payday loans. This led to multiple complaints to the Financial Ombudsman Service and escalating dissatisfaction amongst customers. From 2013, tightening credit regulation of the unsecured lending market proved challenging, and around 50 percent of payday lenders exited the market. The remainder had to evolve fast.

As more people started looking for payday loan alternatives, non-traditional financial institutions took advantage of technology innovation to create new lending platforms (including peer-to-peer and crowdfunding sites).

This point of view highlights three areas non-traditional financial institutions have addressed and suggests how traditional lenders can learn from their success.


Key Findings

With the UK’s unsecured lending market continuing to expand, Accenture believes traditional lenders must focus on three areas to grow their business:

  1. Identify the right product mix: To design and develop innovative products, management and organisational structures must support new ways of working, including development of new capabilities in areas such as decisioning, collections and forbearance.

  2. Target unmet customer needs: There has been a decisive shift in industry dynamics from firms offering high-risk products that didn’t meet customer needs, to firms offering products and services tailored closely to customer requirements. This has forced a rethink in strategies and business models for all providers. Leaders will place customers front and centre in everything they do.

  3. Successfully adapt to the fast-evolving technology landscape: Lenders need to change how they create and deliver products. They need to create organisation, with more ‘Agile’ delivery methods (that impact the customer-facing layer) running in parallel with traditional (waterfall/sequential) methods. Third-party delivery—via application program interfaces/APIs—into the organisation will also need to be coordinated.


With consumer lending at its highest since July 2010, there are outstanding opportunities for companies that can create new, technology-driven product offerings to target a range of customer segments. The following capabilities are key to realising these opportunities:

  • Be ready to meet customers’ unmet needs: Lenders need to listen to their customers, understand how their behaviours are changing and identify any needs that are not being met. Banks have enormous quantities of customer data at their disposal. Align their lending products and servicing methods to meet customer preferences.

  • Use technology to lower the cost to serve: Traditional lenders must prioritise to move from reliance on high-cost legacy systems to third-party platforms that can significantly reduce cost to serve. Understanding and investing in the right technologies through the right partners is vital.

  • Ensure ease of access: Develop full-service mobile and internet finance offerings (backed with automated lending processes).

  • Enable rapid, accurate decision-making: Lenders need systems, controls, processes and governance procedures that enable comprehensive, rapid and accurate due diligence for every lending decision.

  • Extract value from data: If lenders can use their customer data to develop a behavioural economics capability, they should be able to offer customers interesting deals from the merchants they like to shop with. The opportunity lies in earning a margin from sellers by matching them with consumers.