The consumer credit market has become more and more the focus of the media due to various legislative proposals and discussions on the subject of “debt”.
The following article shows how the market has developed in recent years and which are the most important market players at the moment.
Granting of bank loans
The term common today for the granting of bank loans to private individuals is consumer credit. But at the beginning of the 19th century, the same type of credit was known under a different term.
Because people used to take out private loans to provide themselves with essential goods and thus secure their livelihood, the loans were then referred to as “emergency loans”.
In the course of time and with the increase in prosperity, consumer credit has not only changed in its name, but also in relation to its purpose. Especially since the Second World War, people have been using consumer loans to meet their needs for non-essential goods, such as vacation, cars or furniture. In this respect, the term “consumer credit” certainly describes the motives of money seekers better.
Facts and figures about the consumer credit market
At the end of 2014, the Central Office for Credit Information (GFI) had a total of 399,224 outstanding consumer credit contracts with a volume of USD 7.3 billion (GFI annual report, 2015). The number of new consumer credit transactions has been falling for several years. While 161,781 consumer credit agreements were concluded in 2010, in 2014 there were only 139,770 new ones.
According to the SILC 2008 survey by the Federal Statistical Office, 14.1 percent of the population lives in a household that has at least one outstanding consumer credit (Federal Statistical Office, 2009). The share of households with at least one consumer loan is highest in the Lake Geneva region (21.3 percent).
In Ticino, this share is 18.6 percent, while in the regions Mittelland, Eastern Switzerland, Central Switzerland, and Zurich it is between 10.3 and 13.8 percent. Households from German-speaking and Romansh-speaking Switzerland thus have the lowest consumer credit affinity nationwide.
Consumer loans are most often used to purchase a vehicle. However, Swiss consumers also take out consumer loans for the procurement of furniture or household appliances, such as televisions or computers (Federal Statistical Office, 2009).
Market share consumer credit market
In his bachelor thesis, Patrick Fernandes investigated, among other things, how the market shares are distributed in the Swiss consumer credit market. Despite difficult comparability and in some cases missing data, he selected the consumer credit portfolios of the individual market participants from the 2014 annual reports and compared them to the total reported consumer credit volume at the end of 2014.
Figure 1 shows the market shares determined in 2014. Good Finance and Honest Bank are the largest consumer credit providers and together makeup 55 percent of the consumer credit volume. Honest Bank is the market leader with a market share of 29 percent, while Good Finance has a market share of 26 percent.
The Berner Kantonalbank’s money-net.ch portal (with Good Finance as a partner), which was not yet active on the consumer credit market in 2011, takes up seven percent of the consumer credit market. Good Finance has a market share of six percent and the remaining share (17 percent) is used by other consumer credit providers.
Figure 2 illustrates the development of consumer credit volume (excluding leasing; only consumer credit in the narrower sense, ie cash loans, installment contracts, fixed-rate credits, overdraft facilities) in the years 1996 to 2014. In the period between 1996 and 1999, there was no clear trend.
The market grew continuously from 1999 to 2009. Overall, consumer credit volume increased by 64 percent between 1999 and 2009. The year 2009 corresponds to the historic all-time high. Since then, consumer credit volume has been on a downward trend. It decreased by 11 percent between 2009 and 2014 and had a volume of USD 7.3 billion at the end of 2014.