Hong Kong,

Hong Kong Consumer Credit Market Continues to Cool as Economic Impact of COVID-19 Persists


  • Credit enquiries, an indication of consumer confidence, fell in the latest quarter for all consumer credit products with the exception of mortgages
  • New account openings, a function of both credit demand and supply, declined
  • Growth in outstanding balances slowed down in line with economic conditions
  • Delinquencies continued to increase as rising unemployment and income shocks impacted consumers’ ability to meet their financial obligations


The newly-released TransUnion (NYSE: TRU) Q2 2020 Industry Insights Report shows that the impact of COVID-19 continues to drive shifts in the dynamics of the consumer credit market. Rising unemployment and a fall in consumer spending are having a dramatic impact on both demand and supply of credit in Hong Kong.

The impact of COVID-19 on Hong Kong’s economy has amplified the levels of negative GDP growth seen in H2 2019 prior to the pandemic. Q2 2020 was the fourth consecutive quarter of negative GDP growth* and the economic impact of the pandemic was clearly observed in the most recent quarter’s consumer credit trends, with a decline in outstanding balances and new account openings, coupled with worsening of credit performance.

“Lenders and consumers alike are taking a cautious approach to credit. Our most recent Financial Hardship Survey shows that seven in 10 consumers reported their household income being negatively impacted by COVID-19. As a result, demand for credit has fallen as people rein in discretionary retail spending and prioritise essential bills,” said Francis Lau, director of research and consulting, Asia Pacific, TransUnion.

The pandemic has impacted demand for credit

Credit cards are the most widely-held consumer credit product in Hong Kong. Card enquiry volumes (a measure of new applications) fell by more than a quarter (28.6%) year-on-year (YoY) during Q2 2020. The decline in consumer confidence and spending** has been marked and has contributed significantly to this trend. The fall in enquiries was even higher for unsecured revolving lines, with a YoY decrease of 38.0%.

Of the categories that experienced a decline in enquiries, it was the least pronounced for unsecured personal loans, down just 2.1% YoY in Q2 2020. It is likely that the increased competition in this sector, driven by FinTechs and money lenders, is partly responsible for this trend. Money lenders tend to have a higher risk appetite, and with struggling consumers often seeking them out as an alternative to high street banks, the impact on overall market supply and demand may have been muted.

While enquiries were down for most major consumer lending categories, mortgage enquiry volumes grew. This increase is likely, in part, due to pent-up demand from earlier in the year coming to the fore.

“The fall in enquiries for most consumer credit categories is a reflection of consumer confidence, especially in the short term. With COVID-19 cases continuing to fluctuate and the shape and speed of any potential economic recovery hard to gauge, consumer appetite and access to credit could have a significant impact on just how quickly retail spending and associated economic growth will return,” continued Lau.

Originations, a measure of new accounts opened, fell for all major credit categories. Originations are a function of both consumer demand and lenders’ willingness to advance credit (supply). During the most recent period (Q1 2020 for originations due to reporting lag), bank credit card (-32.4%) and loan on card(-27.3%)—which are a connected set of products—saw the biggest YoY decline.

Q2 2020 Metrics for Major Credit Products in Hong Kong

Credit Product

Q1 2020(i) Originations – Annual Change

Enquires – Annual Change

Outstanding Balances – Annual Change

Balance-Level Serious Delinquency Rates(ii)(iii)

Balance-Level Serious Delinquency – Annual Change (Basis Points)

Bank Credit Card





+15 bps

Loan on Card





0 bps

Auto Loan





+16 bps






+1 bps

Unsecured Personal Loan





+20 bps

Unsecured Revolving Line





+23 bps

Source: TransUnion Hong Kong (except for mortgage data which is from the Residential Mortgage Survey (June 2020) published by the Hong Kong Monetary Authority)

  1. Originations are viewed one quarter in arrears to account for reporting lag.
  2. 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.
  3. Delinquency data are reported at a balance level except for mortgages, which are reported at an account level.

In line with a decline in demand and originations, outstanding balance annual growth dropped for auto loans (-14.3%), unsecured revolving lines (-9.4%), and credit cards (-8.2%) in Q2 2020 when compared to the same period a year ago. This declining balance trend has been observed for four consecutive quarters, primarily caused by a sluggish economy in the latter half of 2019 being further impacted by the onset of a pandemic.

While most credit products have experienced a decline in outstanding balances, mortgage balances have continued to rise in the last two years, with the most recent quarter observed at a little over 10% growth YoY. This contrary trend is driven by higher average balances on newly opened mortgages, which more than offset mortgage repayments in the quarter. The growth in loan on card (up 8.4% in Q2 2020 compared to Q2 2019) might, in part, be due to its availability. Banks allow consumers to utilise any unused credit limit on their card and convert it to cash. This borrowing tends to be offered at a reasonable rate so is often a favoured source of affordable additional funds. Clearly, consumers are leveraging this product feature to either create liquidity or manage financial situations.

Performance worsens as financial hardship grows

Based on the findings of TransUnion’s latest Financial Hardship Survey***, a significant (71%) proportion of consumers in Hong Kong reported that their household incomes were negatively impacted by COVID-19, up from 68% reported the month before. 79% of consumers who reported their household income being negatively impacted by COVID-19 were concerned about paying their bills, up from 69% in the first survey conducted in Hong Kong week of 30 March.

With an increasing number of Hong Kong consumers worried about their ability to pay their bills, a general increase in delinquencies is to be expected. An increasingly prolonged period of negative economic growth has continued to put pressure on household finances, and consumers are having to prioritise which bills to pay. While delinquency rates remained low, YoY deterioration was observed for most credit products and was most significant for unsecured revolving lines – up 23 basis points YoY in Q2 2020.

“It is always worth putting Hong Kong delinquency rates into context. Compared to global standards the level of default in the Hong Kong consumer credit market is still very low, but in recent quarters there has been a rise in delinquency rates across all of the major consumer credit categories,” concluded Lau. “How lenders mitigate against higher risk while driving growth within resilient consumers will define how successful they are. Being able to predict when a consumer might need support will allow them to provide a more tailored service, and in the long term potentially build greater loyalty and profitability.”

For more information about the TransUnion Hong Kong Industry Insights Report and to register for TransUnion's Q2 2020 Industry Insights Report webinar scheduled for 3 p.m., September 17, 2020, Thursday, please visit our dedicated website page.

* The latest GDP figures show that the Hong Kong economy contracting by 9.0% year-on-year (YoY) in Q2 2020, very similar to the 9.1% fall seen in Q1 2020.

** The Monthly Retail Survey (MRS) published by the Hong Kong Census and Statistics Department (CSD) showed that in June 2020, YoY the total value of retail sales in Hong Kong decreased by 24.8%.

*** Survey conducted week of 27 July. Survey sample of 1,006 Hong Kong consumers.