More mergers expected in lending market

DELOITTE is predicting that regulatory changes could lead to more consolidation in the consumer finance market.

Since last April the industry has been regulated by the Financial Conduct Authority (FCA), rather than the Office of Fair Trading.

Deloitte said the change had forced companies to take on more staff to comply with legislation on lending checks.

In addition to these cost pressures, the FCA has announced a cap on the cost of short term loans to rein in payday lenders.

Daniel Wright, director in transaction services at Deloitte in the North West, said: “In the short to medium term, we expect such developments to drive change in the consumer finance sector. This is likely to spark M&A-led consolidation; result in some companies exiting the market; as well as introducing new products that are designed for a rate-capped environment.

“Those companies offering best practice in either delivering customer satisfaction or adapting to the increased operational requirements will be motivated to acquire other firms to help deliver economies of scale. Such acquisitions will be to upscale in existing markets, or diversify with new products and consumer groups.”

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