Decreased Activity in Consumer Credit Market Driven by Changes in Borrower and Lender Behavior

  • Against a backdrop of worsening economic conditions, Hong Kong consumers have curtailed their spending and lenders have tightened their underwriting, which is causing declines in outstanding balances and origination volumes
  • Although still very low by global standards, delinquencies have started to rise in the major unsecured consumer credit categories of credit cards, unsecured personal loans and unsecured revolving lines
  • Gen Z consumers are showing the biggest increase in delinquency rates for credit cards, unsecured personal loans and unsecured revolving lines

The newly-released TransUnion (NYSE: TRU) Q1 2020 Industry Insights Report shows that COVID-19 has severely amplified the impact of the 2019 Hong Kong recession, and started to shape the consumer credit market in a number of distinct ways.

With economic conditions worsening and incomes negatively affected by the global pandemic, Hong Kong consumers have been pulling back on their spending and have reduced their appetite for credit more generally. At the same time, as delinquencies have started to rise, especially in the major unsecured lending categories of credit cards, unsecured personal loans and unsecured revolving lines, lenders have been tightening their underwriting. Together, the changes in consumer and lending behavior have caused a contraction in the Hong Kong consumer credit market.

s better understand these changes and predict potential trends within the consumer credit market, TransUnion Hong Kong is developing a bespoke credit forecast model. Francis Lau, director of research and consulting, Asia Pacific, TransUnion, explains: “We know macroeconomic conditions are likely to remain under stress for the remainder of 2020 and may still deteriorate further – this is true for most economies around the world. Our model aims to look at the potential trajectory of the consumer lending market in Hong Kong as a result of any changes caused by COVID-19, and will map the impact on key metrics like originations, balances and delinquencies.”

The model’s findings will highlight the potential impact of the economic downturn on consumer credit growth and loss rates, facilitate policy decisions, and provide insights to help lenders set and modify their strategies and enable them to continue assisting consumers during these unprecedented times.

Source: TransUnion Hong Kong