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TransUnion’s Industry Insights Report – Impact of pandemic still very real on consumer credit market

“South Africa’s consumer credit market remains subdued as the pandemic continues to impact household finances,” according to the TransUnion’s Q4 2020 South Africa Industry Insights Report. This in the midst of the just-released StatsSA data that indicates that more than 500,000 people lost their jobs between December 2019 and December 2020 when the country underwent different levels of lockdown due to the coronavirus pandemic.

TransUnion reports that enquiries, a measure of consumer demand, and originations, a function of both supply and demand, both fell across all major consumer credit categories during the latest period. At the same time, delinquencies continued to climb for most products except for credit cards, which saw a marginal improvement. The increase in missed payments also contributed, in part, to an increase in outstanding balances across most product categories.

“Challenging economic conditions mean household finances remain stretched, and both consumers and lenders continue to take a cautious approach to credit as a result. Like many other markets around the world, consumers are having to make difficult decisions about which debts to prioritise. Although annual trends indicate a challenging credit market, when we measured the recent quarters, we see a road to recovery. However, there is still significant uncertainty around the vaccine rollout, general easing of restrictions, and the rebound in macroeconomic conditions, and as such it is too soon to expect a sustained recovery in key credit metrics,” Carmen Williams, director of research and consulting for TransUnion South Africa comments.

According to Williams, the payment priorities of consumers are becoming even more defined as we navigate through the current crisis. “Lenders need to be constantly monitoring and adjusting their underwriting criteria and portfolio risk management strategies in order to accommodate increasingly challenging household finances. Trended and alternative data continue to be lenders’ best mechanism for understanding shifts in consumers’ financial behaviour. By applying these learnings, they can better anticipate likely scenarios and often intervene to help consumers before their situation is critical. At the same time, lenders can leverage enhanced data and insights from the recent crisis to lend to resilient consumers and ensure they have a healthy, balanced approach to enable portfolio growth.”

Now more than ever, financial advisers need to be close to their clients to guide them through these uncertain times.

Click here to download an infographic that unpacks the most important facts, findings and insights held of the Q4 TransUnion report.

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