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Consumer credit market – Q2 2020 shows Lockdown impact on industry

The findings of the TransUnion Industry Insights Report, which looks at the South African credit market across three dimensions among credit products, originations, balances and delinquencies, confirm that consumers are having to prioritise their personal finances to cope with the dramatic effects of the pandemic in addition to the fall in GDP and associated rise in unemployment.

“The latest report encompasses the first full quarter where COVID-19 related lockdowns and social distancing measures were in effect. Consumers and lenders have had to adapt to very challenging conditions and we are starting to see the emergence of a number of important trends. The use of payment holidays has contributed to a general increase in outstanding balances. At the same time, demand for new credit declined significantly,” according to Carmen Williams, Director of Research and Consulting.

Here are some of the insights of the report:

Whereas in the normal course of time, the majority of consumers would be making regular payments against outstanding debts, during Q2 2020 a significant number of South Africans applied and qualified for payment holidays. This has driven an increase in outstanding balances, with interest continuing to accrue as repayments have been put on hold.
The demand for consumer credit fell during the quarter in response to the COVID-19 crisis and associated deterioration in economic conditions. The YoY fall in enquiries was apparent for most major credit products, but most pronounced for the unsecured lending categories – credit cards (-62%), bank personal loans (-47%) and non-bank personal loans (-39%). Home loans was the only category to record a rise in enquiries, up 11%, as pent-up demand from a hard lockdown was released as measures eased.

“Although many of the trends identified in the latest report are to be expected, it is important that lenders and consumers don’t become complacent. These are extraordinary times and lenders need to adopt new ways of thinking. Maintaining a deep understanding of portfolio risk as well as the potential impact of further shifts in the economy as consumers continue to adapt to a COVID-19 world, will allow lenders to develop strategies that can help them grow customer loyalty and build business resilience,” concluded Williams.

Click here to view an infographic of the TransUnion Industry Insights Report Q2 2020

Click here to download the Quarterly Overview of Consumer Credit Trends Released by TransUnion Financial Services.

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