Consumer lending

Consumer credit licences are required for businesses offering lending and credit services to individual consumers. These licences allow companies to provide financial products such as loans, credit lines, and hire purchase agreements in a compliant and responsible manner. Common business models that operate under consumer credit licences include:

  • Mainstream consumer credit lenders
  • High-cost lenders
  • Motor finance providers
  • Retail finance providers
  • Consumer hire firms

Trends boosting the sector

Technological trends

The rise of digital platforms, AI, and machine learning enables more precise credit assessments in shorter time. As a result, the onboarding process of new users has been significantly enhanced and has led to higher efficiency in lending operations. Additionally, open banking is empowering lenders with improved data access, generating tailored made credit products.

Regulatory trends

With consumer protection at the core of all regulators' mission, regulators have implemented stricter standards around responsible lending and transparency between parties. These measures are designed to build trust and accountability in the consumer credit sector.

Market drivers

Economic uncertainty, fintech disruption, and a general shift toward digital solutions are pushing the demand for alternative credit options. Consumers are increasingly looking for accessible, flexible financing options, which digital lenders are well-positioned to provide.

Several companies lead the way in consumer credit by adhering to licensing standards

  • Klarna: A leading buy-now-pay-later provider known for flexible payment solutions has had a stable development trajectory with 29% revenue growth year on year, coupled with a gross merchandise volume growth of 17% year on year.
  • Zopa: A digital lender offering personal loans and credit products tailored to consumers. These services have allowed the company to grow its customer base to over 1 million by 2024, reporting its first full year profit, with a total operating income of £222 million, up 47.8% year-on-year.
  • 118 118 money: Offers quick and simple online personal loans and credit cards, designed to include individuals with poor credit histories who would otherwise be overlooked by mainstream lenders. As a result, the company has gained the trust of over 800 thousand customers as of October 2024.