The consumer credit market - France (2023)

1.2 Growth in the European market

Consumer credit markets are not uniform across Europe. The use and forms of loans are determined and evolve by socio-economic factors that can differ from country to country. For example, Germany is known for its debt-averse consumers, while in the UK or Turkey, it is more acceptable to hold large revolving balances on credit cards. A common trend in European countries, however, is the growth of consumer credit.

Indeed, since ****, the consumer credit market has been recovering not only in France, but also in Europe, as shown in the chart below. After falling by *.*% in ****, consumer credit production has risen by *.*% and *.*% in **** and **** respectively.

Annual trend in European consumer credit production Europe, ****-****, in Source: ****

In the **-member European Union, total consumer credit outstanding increased by *% in **** to reach €*,*** billion at December **. This increase is mainly due to economic growth in the European Union since the end of the sovereign debt crisis (***). Outstanding consumer credit seems to follow procyclical phenomena: its evolution follows the same direction as that of GDP, but more markedly. Low interest rates are also contributing strongly to the increase in outstandings. [***]

1.3 The French market: in difficulty as interest rates rise

In September ****, total consumer loans amounted to *** billion euros . This sum has risen steadily since ****, although growth has slowed in recent years. Outstanding consumer credit refers to the total amount of credit issued by financial institutions on a given date and not repaid. It is therefore a stock. Outstanding consumer loans France, ****-****, in billions of euros Source: Banque de France Growth in credit production, as a flow as opposed to outstandings, is increasingly slowing, reflecting the sector's difficulties in the face of rising interest rates. The deterioration in the consumer credit market persists, although the rate of decline is beginning to slow. In June, overall credit production fell by *.*% year-on-year, marking a slowdown on the declines of *.*% in May and *.*% in April, as reported by the Association des Sociétés Financières (***), which brings together all the sector's specialist institutions. This downward trend in consumer credit is mainly attributed to the collapse of personal loans. Despite measures to monthlyize the usury rate, the situation remains worrying, with a further **.*% drop in production in the second quarter, following a **.*% fall in the first half, according to the ASF press release. [***] Growth in consumer credit to households France, ****-****, in Source: ...

1.4 The Covid-19 effect

Decline in purchasing power

In the second quarter of ****, real gross domestic product (***).

As a result, consumer credit production plummeted in ****, peaking in May with a **% drop in consumer credit production by specialist institutions. However, a recovery seems to have begun in August, with a *.*% rise in loan production by specialist institutions.

Annual variation in production France, ****-****, in Source: ****

Change in credit choices

The French prefer short-term loans, which are considered less binding, and do not intend to touch their precautionary savings.[***]

It is therefore possible that this rise in savings is encouraging households to take out consumer credit to avoid using up their savings. In addition, for those who have already taken out a consumer credit and are having difficulty repaying, measures are being put in place, notably maturity deferrals. [***]

2.1 Borrower profile

According to a **** survey, it appears that **% of borrowers are consumers with a comfortable standard of living, who wish to indulge themselves and are adept at "coup de coeur" purchases. Rational consumers represent **% of those surveyed, and are those who wish to benefit from financial assistance for large, well-considered purchases. In addition, **% of borrowers use consumer credit to overcome budgetary constraints and cope with their low standard of living and financial difficulties. Opportunistic borrowers (***) are those who don't mind using consumer credit, which gives them access to a quick sum of money to take advantage of the bargains they're on the lookout for. Finally, instinctive consumers (***) have an average standard of living, but like to spend and appreciate change. Profiles of borrowers who take out consumer credit France, ****, in Source : CSA There are also geographical differences. Borrowing amounts are on average higher in the West: Brittany in the lead (***). Last but not least, CSP+ borrow on average more than CSP- (***). [***] In May ****, almost half of all borrowers were aged between ** and **. In fact, this age range corresponds to the start of working life and more durable, more expensive purchases. People aged ** to ** are therefore the most numerous, followed by those aged ...

2.2 Microeconomic determinants of demand

The graph shows the evolution of the reasons for using consumer loans for different categories of goods between **** and ****. Here are some observations: *. Household equipment (***): - A downward trend has been observed since ****, indicating a gradual decline in the use of the loan for the purchase of home equipment goods. The proportion has fallen from *% in **** to *.*% in ****. *. A car, a motorcycle: - Although demand has fluctuated over the years, there is a significant drop in **** compared to previous years. This is linked to the decline in vehicle registrations. *. Leisure equipment (***): - The proportion remains relatively stable over the years, indicating a steady use of the loan for the acquisition of leisure equipment, albeit in small amounts. *. A financial product (***): - Although the amounts remain minimal, there is a slight increase in ****, suggesting a possible increase in the use of the loan for financial investment purposes. *. Other non-business property: - The proportion has fallen over the years, showing a downward trend in the use of the loan for the purchase of other non-business assets. In summary, the graph shows a diversification of the reasons for using consumer loans, with varying trends according to the category of goods. Home-related purchases and vehicles ...

2.3 Macroeconomic determinants of demand

Purchasing power, consumption and savings rates Changes in household purchasing power have a major influence on household consumption, and therefore on their willingness to take out consumer credit. Since the **** crisis, purchasing power has evolved slowly, and growth has slowed. In particular, the sharp rise in the proportion of pre-committed expenditure (***) has weighed on arbitrable purchasing power, which is closer to the way households feel.

Similarly, purchasing power per consumption unit, which takes into account the reduction in expenditure involved in living together, rose by just *.*% a year on average between **** and ****. [***]

Annual change in household purchasing power France, ****-****, in Source: ****

Trends in household final consumption expenditure are relatively in line with trends in purchasing power. After a slowdown between **** and ****, consumption increased in ****.

Change in household final consumption expenditure France, ****-****, in Source : Insee Change in interest rates The fall in interest rates (***) is one of the main drivers of the consumer credit market, which is becoming increasingly attractive.

The automotive market

On the one hand, the decline in new car registrations had a negative impact on the production of conventional car loans, causing them to fall by **.*% over the year as a whole. On the other hand, growth ...

3.1 The value chain

There are several stages in the consumer credit production process:

Design and marketing involve identifying targets, defining offers and developing sales networks. Granting and risk policy involves establishing selection criteria, assessing risk and segmenting the profiles of potential borrowers. The underwriting and acceptance stage involves creating the file, validating it and releasing the funds. Contract management mainly involves monitoring repayments and the loan file. Collection optimization

These stages are mainly handled by lenders, who can take care of the entire production and distribution process without the intervention of external distributors. If a distributor is not also a lender, its role is simply to develop the product's marketing and communication networks. They may also take part in designing offers and managing collections to guarantee customer relations and a positive brand image.

A captive bank belongs to a commercial company whose main activity is not finance. Its purpose is to provide financing for the company's activities, and it responds to loan requests from its customers. [***]

From then on, there are many players in the market, and they can be lenders, distributors, or both. The market is organized as illustrated below.

Source: ****

3.2 The main players

The players in the consumer credit market are therefore highly diversified. The main players include

Network banks: Crédit Agricole, LCL, Crédit Mutuel, BNP Paribas, La Banque Postale, HSBC, Société Générale Online banks: Boursorama Banque, Axa Bank, BtoBnak, HelloBank!, My Money Bank, Younited Credit, Orange Bank, Fidor Bank Specialized subsidiaries of major banking groups : Cofidis, BNP Paribas Personal Finance (***), Financo, Natixis Financement, CGI Finance Retail: Carrefour Banque et Assurances (***), Banque Edel Automotive captives: PSA Finance (***) Brokers and comparators : Meilleurtaux.com, Empruntis, Bourse des Crédits[***]

Traditionally, consumer credit has been produced either by banks or by specialized institutions. While banks tend to produce personal loans, specialized establishments (***) tend to produce earmarked and revolving credit. [***]

The banking channel dominates the production of consumer credit. For example, almost **% of revolving credit was produced and distributed by banks in Q* ****. On the other hand, the share of revolving credit production by specialist institutions fell by more than ** points between **** and **** Distribution channel for revolving loans (***) France, Q* **** - Q* ****, in % Source: Banque de France Banking groups therefore dominate the market, in particular Crédit Agricole (***). [***]

3.3 Digitizing the market

According to a study by Roland Berger, one of the biggest challenges so far is digital transformation issues such as Big Data, digital contracts or new identification technologies. Over **% of those surveyed believe that digitalization will be the most important technological trend in the years to come.

The survey questioned senior executives from ** bank subsidiaries and other consumer credit providers in Europe.

The main areas of focus are big data, digital signatures and new identification technologies.

Most important digital transformations in the consumer credit market Europe, ****, in Source: ****

The digitalization of the market involves both the transformation of existing players and the proliferation of FinTechs in the sector. For example, in February ****, La Banque Postale announced the launch of an "express loan". The bank promises to respond to customers on their loan application within minutes. In addition, the development of Younited Credit, the first online personal credit platform in France with établissement de crédit délivré par l'Autorité de contrôle prudentiel et de résolution, bears witness to the rapid digitalization of the sector.

Hyperconnection calls for hyperpersonalization

In ****, customers, who are increasingly hyperconnected, multi-banked and familiar with digital paths, interact less frequently with their bank advisor. Nearly four ...

4.1 Offer typology

There are many different types of consumer credit. The table below gives an overview of the main offers and their characteristics.

Source: ****

In addition, offers differ from one consumer credit issuer to another, for example :

Cetelem offers an APR starting at *.**%, for a loan of €**,*** over ** months Sofinco offers a fixed APR of *.***%, for €**,*** over ** months Cofinga offers an APR from *.**% for a loan of €**,*** over ** months Cofidis offers an APR of *.**% for a loan of €**,*** over ** months

APRs fluctuate according to the amount borrowed and the loan term. However, it should be noted that rates rose significantly in ****, resulting in significantly higher monthly repayments.

4.2 Breakdown of credits by category

Amortizable loans are the most widespread form of consumer credit, accounting for almost **% of outstanding loans in ****. They enable borrowers to spread the repayment of capital and interest over a long period. They are followed by revolving credit (***).

Breakdown of outstanding consumer credit by type of credit France, ****, in Source: ****

Leasing, on the other hand, saw the biggest decline in June **** compared with June ****, with a growth rate of -*.*%. Leasing (***) until the end of the contract.

In recent years, leasing has grown considerably, but is now experiencing difficulties.

Ordinary debit accounts refer to overdraft accounts, which involve the payment of interest rates. if the consumer is overdrawn for more than three consecutive months, the bank must offer a consumer credit.

Lastly, amortizable loans and revolving credit are experiencing the slowest growth, but remain in the majority on the market.

Annual growth rate of consumer credit types France, ****, in Source: ****

4.3 Consumer credit interest rates

Aftera period of steadily falling interest rates between **** and January ****, there was a sharp rise in **** and ****, as shown in the graph below. Consumer credit interest rates have risen significantly over this period. Interest rates on revolving loans rose by *.* points between January **** and September ****, while those on amortizable loans increased by *.* points over the same period. This substantial increase in interest rates has had a very negative impact on consumer credit production. France, ****-****, in % Source: Banque de France Interest rates also differ according to the lender and the nature of the loan. Interest rates are generally higher when loans are issued by specialized institutions, rather than by banking groups. The APR (***) represents the total cost of credit for the consumer. [***]

The table below shows the APRs for a loan of **,*** euros over a **-month period to November **, ****, reflecting the differences that can exist between different types of consumer credit.

Source: ****

5.1 Regulations

In France, a number of laws aim to achieve a better balance of power between professionals and consumers, and guarantee certain rights for consumers: the right to information, the right of withdrawal, the right to early repayment, the right to suspend repayments, etc. [***]

The Lagarde Act of July *, **** comprises several measures:

Borrowers can choose their own creditor insurance when taking out a loan. Overindebtedness procedures are accelerated Usury rates are defined not by the nature of the credit, but by its amount. For revolving credit, a maximum repayment period has been introduced, along with the obligation to offer the borrower, at the point of sale or by distance, the option of taking outan amortizable credit instead of a revolving credit, when the credit is used to finance the purchase of specific goods or services and the amount borrowed exceeds €*,***.

[***]

The Châtel law of January **, **** obliges credit institutions to make a new loan offer in the event of an increase in revolving credit.

The Neiertz Act of December **, **** introduced measures to prevent and resolve difficulties linked to the excessive indebtedness of individuals and families.

The Scrivener Act of January **, **** provides for the protection and information of consumers taking out consumer ...

6.1 Segmentation

The table below provides a non-exhaustive overview of the main types of player.

• Younited Credit
• Société Générale
• Cetelem
• Crédit Agricole Consumer Finance
• Carrefour Banque
• RCI Bank (Groupe Renault)
• Alma
• Sofinco (Credit Agricole Consumer Finance)
• Cafom
• Aptimiz
• Holosis
• Damartex group
• Azuvia
• Sygma Banque (BNP Paribas)
• My Money Bank (GE Capital)
• CGI Finance
• Créatis (Cofidis)
• FLOA Bank (BNPParibas))
• Oney
• CFCAL (Crédit Foncier et Communal d'Alsace et de Lorraine)
• Franfinance (Groupe Société Générale)
• Pledg (Credit Agricole)
• Cofidis France