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Year of the Dog Begins with Emergence of Generation Z
The first quarter of 2018 heralded the emergence of Generation Z, those consumers born 1995 or later, in the Hong Kong consumer credit market. TransUnion’s newly released Q1 2018 Industry Insights Report found that not only is Generation Z (Gen Z) experiencing the greatest growth rate in installment loans, it’s also introducing a new competitive dynamic.
Overall, total installment loan balances grew 1.9% in the first quarter, continuing a trend of year-over-year balance growth that was seen in every quarter in 2017. Younger borrowers are playing an important role in driving this growth.
"Gen Z represents a very small part of the Hong Kong economy, but the immense growth we’ve observed by the youngest generation in such a short period is likely just the beginning of a transformative shift in the Hong Kong consumer credit market. As younger consumers with purchasing power enter the market, lenders will need to understand that their borrowing needs may differ from older generations – even from Millennials, who have long been viewed as the catalyst for credit growth in the market. It’s highly likely that digital channels will continue to be a key in reaching Gen Z consumers as we’ve already observed."
Brendan le Grange, Director, Research and Consulting for TransUnion Hong Kong
Tax loans experienced a revival in demand, with a 42% year-over-year increase in loan inquiries in the first quarter. Tax loans by their nature have an older profile and Gen Z made less than 1% of those inquiries, but even here the volume of their inquiries is up 87.2% since the last season and year-over-year balances more than doubled. But Millennials, who now open 1 in 3 new tax loans, saw the largest year-over-year total balance increase of any age segment.
"Millennials are transitioning from up-and-coming consumers to mature borrowers with significant incomes; many of the older members of this segment are in their late 30’s and have become high earners. As they have already done with credit products like credit cards and mortgages, we expect Millennials to become an increasingly important segment of the tax loan market. At the same time, while Gen Z remains a very small portion of the tax loan portfolio today, the experience of the Millennial segment in recent years can serve as a guide for expected future growth of the Gen Z segment."
Brendan le Grange, Director, Research and Consulting for TransUnion Hong Kong