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Gauging consumer spend and risk amid the pandemic

The COVID-19 pandemic has made many Hong Kong consumers more prudent. But while credit card spending is down, card delinquency rates have risen, how can lenders achieve growth while managing escalating delinquency risks in such an uncertain economic environment?

In his TransUnion 2020 Hong Kong Financial Services Summit session — The Importance of an Industry Point of View — Francis Lau, Director Research and Consulting, Asia Pacific, shared recent consumer confidence data and its relation to the performance of different lending products.

Seventy-three percent of consumers’ incomes have been impacted, changing spending habits.

Lau points out according to TransUnion’s Consumer Financial Hardship report, more than 73% of consumers reported their income was negatively impacted by the pandemic, with 15% having lost their jobs. Increased financial pressure caused consumers to delay or cancel plans for larger expenditures while also curbing discretionary spending (52%). And of the 76% of affected consumers concerned about paying their current bills, 31% were unsure they’d be able to meet their obligations within the next four weeks.

With consumer spending down overall, credit card spending has naturally been impacted, seeing a drop of 14% in outstanding statement balances: HK$89.6 billion in 2020 versus HK$104.1 billion in 2019 during the same second quarter period. If we dive deeper into outstanding credit card balance data and separate by age group, the total amount borrowed by each segment has decreased, with borrowing by Millennials (1980–1994) reduced by the smallest margin.

In 2019, Hong Kong card delinquencies maintained relatively stable low levels. However, since the fourth quarter of 2019, card delinquencies are on the rise. The percentage of cards with 30+ days-past-due has risen to 0.93% — a YoY increase of 0.36 percentage points — reflecting the financial difficulties of cardholders during these difficult times.

The property market — unfazed by the pandemic

As consumers cut back on discretionary purchases, spending attitudes toward homeownership are undaunted: TransUnion data confirms home mortgage enquiries have risen to approximately 138,000 in the second quarter of 2020 alone. The YoY increase of 10.2% with those born after 1980 account for the largest proportion, reflecting the different attitudes of younger generations toward the market.

Lau mentioned during the first wave of the pandemic, in-person property viewings were greatly affected as many stayed home. Demand was there, but potential buyers weren’t willing to leave their homes to view properties. When the pandemic began to ease in the second quarter, this pent-up demand was released. At the same time, mortgage demand is highly correlated with property price movements and, as the property market performed better, mortgage enquiries naturally increased.

Although total consumption of Hong Kong consumers has fallen, there are areas where spending has not dropped — dependent on consumer age group. Consequently, businesses should create relevant credit products that match the current economy and changing market dynamics to be successful.

Interested in more data and analysis? Click here to watch the on-demand session recording and download the presentation deck. Contact your sales representatives or click here for password.

Identifying potential high-risk customers through data analysis

By understanding the spending habits and individual risk of consumers, money lenders can reduce delinquency risk while increasing market share and influencing product strategies. TransUnion solutions and products provide an accurate and comprehensive picture of each customer, allowing organisations to better meet their unique needs.


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