Contents:

TABLE OF CONTENTS ABOUT US 2 Executive summary 4 Financial services firms are targeting specific growth segments in the consumer finance space 5 European consumer finance is poised for strong growth 6 Consumer finance is a major opportunity for retail banks 8 Technology implications 11 Effective consumer finance execution requires the ultimate “one to many” back office 11 BPM tools improve process efficiency, particularly in the collections process 13 Real-time credit scoring tools will deliver enhanced customer service 13 Best of breed analytics are vital for risk management 14 Key take outs for vendors 14 APPENDIX 16 Future readings 16 SPP writing team 16

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This information has been extracted from various sections of the report Table 1: Consumer credit balances outstanding for major European countries, 1998-2002 - Overall lending will continue to expand strongly. As detailed in the figure above, the European consumer credit market has seen strong growth in recent years, particularly in Italy and the UK. We believe that this expansion can be expected to continue at a similar rate over the next few years, for the following reasons: Cultural changes. Historical objections to credit, many of which have been linked to religion (a key factor in Catholic countries such as Italy, France and Spain), appear to be disappearing as greater product transparency and improved availability of information enable consumers to better assess the benefits and risks of credit. As customers become more financially sophisticated, We believe they will continue to become more comfortable using credit products. More aggressive targeting by lenders. As consumers become more receptive to credit products, lenders have been increasingly aggressive in developing innovative, cost-effective propositions and are focusing their efforts on targeting specific customer groups, such as the sub-prime market. Retailers, as well as banks and specialist consumer finance houses, are seeking to jump on the bandwagon. The factors that are driving retail banks to enter the space are set out in more detail in the following section. Low interest rates. Cuts in interest rates increase the attractiveness of revolving credit products. A good case in point is the UK, which .......... Key growth markets As detailed above, more and more FSIs are seeking to establish multi-market platforms as they seek to exploit consumer finance as a vehicle for pan-European expansion. Key to this will be establishing an early foothold in fast-growing markets. We believe that the following countries / regions in particular have strong growth potential: - Italy. The Italian consumer finance market is one of the smallest in Western Europe in terms of percentage of GDP. Factors such as high saving ratios, cultural factors, and interest rates above the European average have been major contributors here. In addition, the main financial services providers have lagged in rolling out innovative products and in developing targeted offerings. However, cultural attitudes towards consumer credit are changing. with providers seeking to develop a more dedicated market proposition (such as Clarima’s for the “non-affluent” market). These factors look set to drive strong market growth over the next few years. - Central and Eastern Europe. The consumer finance market in CEE is taking off in earnest. In Bulgaria, for instance, the value of consumer loans is estimated to have increased by 75% in 2003 alone. With EU accession, ongoing economic growth and the consequent infiltration of consumeristic attitudes, this phenomenal expansion is set to continue. A number of major Western European retail banks, notably SCH and BNP Paribas’ Cetelem business, have already developed strong franchises. The expected large number of additional Western entrants will continue to fuel this growth as customers demand more sophisticated, innovative products.