U.S. Lenders Must Refocus Strategies to Grapple with Slowing Consumer Lending Market

Fueled by low interest rates and increasing home prices during the first half of the decade, consumer lending in the United States has had a good run — with the consumer credit market currently at $10.5 trillion (USD). Yet recently, the Federal Reserve forecasted that while non-real estate consumer lending will continue to increase in 2006, it will be at a slower rate of 3% (versus prior years’ rate of close to 5%).

New research from TowerGroup concurs, finding that growth in U.S. consumer lending will rise 8.5% in 2006 — down from 11.7% growth in 2005. A chart illustrating U.S. consumer credit trends from 1999 to 2006 can be viewed and downloaded at: www.towergroup.com/research/content/page.jsp?pageId=802.

Now, after several years of success, consumer lenders are expecting — even demanding — continued growth rates in their consumer loan portfolios. Despite the coexistence of contradictory market conditions, TowerGroup believes that financial services institutions can still achieve growth above baseline levels — but will have to do so by grabbing share from competitors. For consumer lenders to gain that competitive edge, they must leverage the best mix of business and technology remedies to drive loan volumes up, keep cost down, retain customers, keep customers paying, and address a wide variety of related issues.

A new TowerGroup report titled, “Chicken Soup for Consumer Lenders: Pain Points and Remedies Across the Consumer Credit Life Cycle” by Bobbie Britting, senior analyst for the Consumer Lending research practice at TowerGroup, analyzes the consumer credit life cycle and suggests a variety of decisions lenders must make at each stage of the consumer credit lifecycle to ensure continued growth. The report also investigates the technologies lenders are leveraging to refocus their efforts, and how vendors are supporting them.