Consumer Finance
Deals Activity: Low
Restructuring Activity: High
Restructuring activity in Consumer Finance
The sector has been consistently high levels of restructuring activity over the last few years.
With various products such as Buy Now Pay Later (BNPL) schemes surging, there is an inherent risk of aggregated consumer debt which may increase default rates.
The Finance and Leasing Association flagged in their Q4 ‘22 outlook that two-thirds of consumer finance providers expect some decrease in new business over the next year, suggesting continued pressure on margins and fixed cost coverage.
With long-term risks in portfolio management potentially impacting industry operations, the FCA has recently announced a new industry body should be enacted to improve credit score quality and support information transparency across consumer data.
Consumer Finance
Rising inflation has already dampened discretionary spending. With the cost-of-living crisis set to remain a central issue for the foreseeable future, consumer finance providers will be acutely aware of the risk of growing bad debts.
Lenders remain focused on liquidity and minimising the risk of future mis-selling claims in a post-COVID landscape. The likelihood of increased regulation, such as increased credit checking scrutiny, over the coming months and years has the potential to increase operating costs for finance providers, as well as making services more cumbersome to use for consumers.
Adapting to a new regulatory landscape and continuing to provide simple, good-value products will remain a priority for responsible lenders. Any upside for the sector will come from record highs of public saving rates built up during the pandemic, funds that still haven’t fully returned into UK and global markets.
Find Your Expert
Ed Boyle is Interpath Co-Lead for the Financial Services sector, which includes Consumer Finance as one of four core segments. Ed also leads our approach to Consumer Finance nationally for Interpath alongside Alex Watkins.
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