Hong Kong Consumer Credit Cools Amid Mixed Economic Indicators
- New card openings remained low, primarily amongst younger consumers, as labour market challenges persist
- Personal loans sustained positive growth activity for the third consecutive quarter, primarily led by digitally native borrowers
Insights from the TransUnion (NYSE: TRU) Hong Kong Industry Insights Report for Q3 20251 show that the volume of credit card originations (new accounts opened) declined by 23.5% year-over-year (YoY) in the second quarter of 20252, with volumes down across all generations and all risk categories apart from subprime3. This was the most significant drop in new credit card originations since the COVID-19 pandemic and follows a 13.0% YoY decline in enquiries in the quarter.
Credit card originations among Gen Z4 consumers – who have for years seen significant YoY card growth as their over-18 population numbers increased – decreased by 11.1% YoY. Originations among Millennials decreased 25.8% YoY, and Gen X originations were down by 26.1%. Across the risk tier distribution, subprime was the only tier that recorded a marginal increase in volume (+0.5%), albeit off a low base of the total population accounting for just 1.1% of total originations. Within the subprime tier, growth was driven by money lender card issuers, where volume increased 39.4% YoY. Money lenders have a greater risk appetite than traditional banks and provide an alternative when the market is experiencing a gap between demand and supply among higher-risk borrowers.
This cooling in the Hong Kong credit card market has likely been influenced by the unemployment rate being at its highest level since August 2022, at 3.9%5 in Q3 2025, with the labour market affected by economic restructuring and weaker hiring in the construction, finance and social sectors. Graduates entering the market have been the most affected, with 8% of young consumers aged 20 to 29 unemployed – the highest level this year, on an upward trend from 5.4% in January 20256.
In contrast to the slowdown in card market activity, the economy experienced a more positive backdrop of softer food and durable goods prices and stronger GDP growth of 3.8%7 YoY. This growth was supported by strong visitor arrivals (up 13.9%)8 and robust growth in food, beverage and valuable gift categories9, along with steady leasing activity and moderate rental increases10.
In addition to these positive trends, S&P Global Market Intelligence11 forecasts a gradual decline in the unemployment rate in 2026, potentially dropping to 3.44% on a seasonally-adjusted basis by the end of the year, which could spur a recovery in credit card demand. S&P Global Market Intelligence also anticipates positive GDP growth through 2026 and a modest rebound in retail spending next year after resuming YoY growth in the second quarter of 2025.
The anticipated improvement in the economic environment, as well as a 7% YoY increase in enquiries (credit demand) observed in Q3 2025, may help drive an increase in new credit activity in the last quarter of 2025. This is supported by findings in the Q3 2025 Hong Kong Consumer Pulse Study, where 48% of surveyed consumers said that they plan to apply for new credit or refinance existing credit within the next year – a 10% YoY increase.
“We have seen a sharp contraction in credit card originations as consumer demand has softened and lenders have shifted their strategies in response to some challenging economic indicators. However, pockets of opportunity remain for lenders who are positioned to respond to Hong Kong’s anticipated moderate sustained growth in the coming months and through the upcoming peak shopping seasons,” said Weihan Sun, principal of research and consulting for Asia Pacific at TransUnion. “Gradual improvements in consumer confidence, along with improved business sentiment, will likely support a rebound in demand for credit cards among consumers, along with greater appetite from lenders who wish to resume growth.”
Personal Loans’ Growth Skews Younger and More Digital
Lenders have expanded personal loan originations for three consecutive quarters, with younger borrowers driving higher activity. Total personal loan originations increased by 1.2% YoY in Q2 2025, with the average new loan value remaining steady. However, younger borrowers drove the majority of the activity, with originations among Gen Z consumers up by 14.0% YoY and Millennials up 1.3%. Gen Z borrowers accounted for 16.7% of personal loan originations, up from 14.7% one year ago, indicating their growing preference for this product as well as the continued expansion in the number of Gen Z consumers who are of credit-eligible age (18+).
Amid the mixed macro-economic conditions, traditional lenders remained cautious, with personal loan originations from traditional banks declining by 5.0% YoY with those from money lenders having grown marginally by 1.0%. However, personal loan originations from digital banks grew by 35.0% YoY, albeit off a small base. Digital banks accounted for 7.7% of personal loan originations during the quarter, up from 5.8% one year ago.
TransUnion’s recent study of wallet diversity among Hong Kong consumers found that consumers intending to expand the credit products they held beyond just credit cards were most likely to open new personal loans for that first additional product. The study also found that 58% of consumers who opened a personal loan as their first non-credit card product did so with a lender who was already represented in their wallet.
“Younger consumers are showing more interest in personal loans as their preferred product for addressing short-term credit needs for larger purchases, such as new appliances, or even for home improvements as Hong Kong’s property market becomes more accessible. Digital banks are responding to this demand, with their streamlined digital experiences addressing young consumers’ needs and preferences,” said Sun. “This trend also reflects a potential shift away from Hong Kong’s card-dominated credit market, as consumers increasingly understand that they can benefit from participating in diverse credit portfolios that best suit their life stage and financial needs. The key for sustainable growth for the Hong Kong credit ecosystem is to identify consumer preferences; address those needs responsibly; and help them manage through their life stages proactively."
Q3 2025 Metrics for Consumer Credit Products in Hong Kong
Credit product | Q2 2025 (i) originations – annual change | Outstanding balances – annual change | Account-level serious delinquency rates (ii) (iii) | Account-level serious delinquency – annual change (basis points) |
Credit Card | -23.5% | -0.2% | 0.03% | 0 bps |
Unsecured Personal Loan | 1.2% | 1.6% | 0.80% | -3 bps |
i. Originations are viewed one quarter in arrears to account for reporting lag.
ii. Serious-delinquency rates are 90 or more days past due for credit cards and 60 or more days past due for all other credit products.
iii. Delinquency data are reported at an account-level up to 150 days past due, excludes 150+ days past due and charge-offs.
“In the coming months, lenders in Hong Kong seeking to expand their portfolios can focus on more considered segmentation to identify and engage with resilient consumers. Previous experience shows that neither ‘blanket’ acquisition campaigns aimed at all consumers regardless of risk tier or need, nor shutting down credit access in times of economic headwinds, contribute positively to growth – a more considered and personalised approach will yield more profitable and sustainable results,” said Sun.
