Impact on Consumer Household Income Eases Amidst Lull in COVID-19 Cases
- Hong Kong consumers who reported a current decrease to their household income due to the pandemic dropped 11 percentage points in latest study
- Signs of economic recovery shown in attitudes toward discretionary spending
TransUnion (NYSE: TRU) today announced new results from its ongoing Consumer Pulse study reflecting the latest financial situation and outlook for Hong Kong consumers. Conducted in June 2021, the latest study found that although still present, the financial impact of the pandemic on Hong Kong consumers had reduced. A still significant 45% of Hong Kong respondents reported that their household incomes were currently negatively impacted due to the pandemic in the second quarter of 2021, down 11 percentage points from the previous round of the study which was conducted in the first quarter of 2021.
Formerly known as the TransUnion Financial Hardship study, the Consumer Pulse study polled 783 consumers between June 1-June 21, 2021. With the number of locally transmitted COVID-19 cases in the city falling to at or near zero over this time and the gradual adaptation to new norms of living, consumer sentiment generally improved regarding their financial situation.
Negative impact on consumer finances slowly fading
Although still below pre-pandemic levels, since the start of 2021 Hong Kong’s economy has started to recover. Consumers in the study reflected this growth, being generally more optimistic in their outlook – there was an eight percentage point drop in respondents expecting COVID-19’s negative impact on their finances to continue in the future (53%). In addition, 21% of all consumers said they have increased their discretionary spending, up three percentage points from Q1 2021. Meanwhile 49% said they have cut back on discretionary spending, an eight percentage point drop from the previous quarter.
“Having tracked the financial impact on Hong Kong consumers for over a year now, it is clear that concerns are easing as the number of COVID-19 cases has fallen and economic indicators improve,” said Marie Claire Lim-Moore, CEO of TransUnion Hong Kong. “Lenders should make use of this time to reach out to existing consumers with support in managing and growing their finances.”
In light of the improving economic situation, only 28% of respondents expected they would be unable to pay at least one of their current bills and loans in full, down six percentage points compared to Q1 2021. Among these, more than a third (35%) felt they would be unable to pay their personal loans. Payment concerns around private student loans came next (34%), followed by buy now, pay later bills (31%).
For those unable to pay their bills/loans, the Consumer Pulse study found that over a third (36%) of consumers would take from their personal savings and 30% would borrow money from friends/family, both down nine percentage points from Q1 2021. The survey also found more consumers intended to pay a partial amount of the total repayment installment (up seven percentage points to 28%) or utilise their payment holidays (up one percentage point to 17%) to make flexible use of the terms and conditions in their contracts.
Less consumers received financial accommodation, with majority ready for when support ends
In light of the improving financial situation shown in the survey, the data also showed that consumers were receiving less financial aid. Only 19% of Hong Kong respondents said they had received financial accommodation in the past year, down four percentage points from Q1 2021. On another positive note, 95% of respondents indicated that they were prepared financially for when an accommodation period ends.
When looking at credit supply, only 30% of consumers said they believe they have sufficient access to credit and lending products – eight percentage points less than in Q1 2021. About half (46%) of all Hong Kong respondents said they find access to credit important to achieve their financial goals. These statistics indicate there is a shortage of consumers who think they have adequate access to credit despite them believing it is important.
“Over two-thirds of consumers were aware of the importance of monitoring their credit, but there is a clear discrepancy between consumer needs and market supply,” said Marie Claire Lim-Moore, CEO of TransUnion Hong Kong. “In order to remain top-of-mind and grow share-of-wallet, lenders should explore the challenges consumers are experiencing to fill the void and enhance loyalty. This will also help improve financial inclusion in the long term.”
Among all the generations of consumers, Gen X have the greatest credit needs. 47% of them stated they plan to apply for new credit in the next year, up 11 percentage points from Q1 2021. That compares to 40% of respondents across all generations (down six percentage points from Q1).
When calculating credit need by risk segments, near prime consumers said they had the most need for credit (67%), followed by prime (63%) and prime plus (62%). 67% of consumers found it either very or extremely important to monitor credit, up eight percentage points from Q1. Finally, in terms of top credit products to apply for, Hong Kong consumers said they plan to apply for new personal loans (43%), credit cards (42%) and auto loan or leases (20%).
TransUnion’s research and credit education tools are being updated regularly on its COVID-19 website as the company continues to support consumers and businesses around the globe.