Lessons from payday lending for other financial service providers

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Consumer credit is booming in the UK, topping £200 billion for the first time since the financial crisis. Almost half of men and women under 30 regularly use credit to stretch their finances until payday. And a quarter of them are constantly in debt.

One in ten have used a payday loan company. The sector has stepped up its marketing since the regulatory clampdown in 2015, when interest rates on short-term credit loans were capped, following the bad reputation the sector gathered for extortionate interest rates and aggressive collection practices.

New research by GK and onefourzero shows that 61% of online posts in 2016/17 about payday loans were attributed to targeted campaigns compared to merely 18% in 2013/14. But is this increased engagement having any effect on the overall sentiment towards the sector?

Our conclusions from an upcoming report are that increased marketing spend and attempts to generate positive sentiment through targeted advertising has little effect on perceptions of the industry. Additionally, the very negative and sustained hostility towards payday lenders reflect concerns about many other financial products and that it’s only a matter of time before consumer sentiment turns profoundly against the providers of other financial products, such as Personal Contract Purchases (PCPs) for cars.

The challenge for companies operating in these sectors – or associated with them – is to ensure that they demonstrate not just outstanding compliance with regulation and codes of practice, but also that they exemplify and improve upon best practice – particularly towards people whose financial and other circumstances make them vulnerable to mis-selling and poor decision making. Otherwise, negative sentiment towards the established providers could be exploited by challenger brands, in much the same way that challenger banks have taken on the UK retail banking establishment.

Watch this space for our upcoming Consumer Credit report. To learn more about how we can help manage your reputation, deliver your services responsibly or negotiate and shape the regulatory and political environment, get in touch with martin@gkstrategy.com

To find out more about how onefourzero’s digital due diligence and insights can help you identify opportunities for growth and potential risks, contact fleur@onefourzerogroup.com