Renewed Spending Confidence Drives Growth in Consumer Credit Balances Amidst Surging Retail and Travel Activities

  • Credit card balance growth linked to renewed consumer confidence and spending
  • Overall personal loan origination volumes decreased but the value of new loans increased
  • Revolving lines continued to grow led by younger consumer demand met by virtual banks

TransUnion (NYSE: TRU) Hong Kong’s latest Industry Insights Report shows the number of new credit cards issued in Q3 2023 (one quarter in arrears due to reporting lag) increased by 2.9% year-on-year (YoY) as the summer sale season in July and August stimulated appetite. Over the fourth quarter that included the festive season, credit card balances grew by 12.5% YoY as consumers leveraged their cards for spending activities over the holiday period. Discretionary and retail spending was likely responsible for the majority of consumer credit card use during the period, but the impact of large spending activity relating to travel also contributed.

As residents took advantage of the first festive season since pandemic restrictions were lifted and borders fully reopened to the world, more than one million people travelled from Hong Kong over the Christmas break[1]. With lenders offering refreshed travel-related reward programmes during this period, many consumers likely responded positively to those campaigns.

Hong Kong residents’ willingness to spend was also highlighted over Singles’ Day (11 November 2023), the annual shopping extravaganza, with sales on the day increasing by 266% YoY[2], highlighting renewed consumer spending confidence. This aligns with TransUnion’s Hong Kong Q4 2023 Consumer Pulse Survey findings, in which 38% of households reported an increase in income – a significant leap from the 21% of consumers who expressed similar sentiments in the same quarter of 2022. This upward trend transcended all income brackets, indicating widespread financial improvements, boosting consumer confidence and spending power. Wider sales data also showed that retail sales growth increased by 17.1% YoY to the end of November 2023[3], and by 7.8% YoY for December[4] alone.

“Analysis shows that consumers spent with less restraint than in the same quarter the year before,” said Weihan Sun, Principal of Research and Consulting for Asia Pacific at TransUnion. “Once the market fully reopened after COVID-19 travel restrictions were lifted, new card volumes grew exponentially from pent-up demand and balances started to build as spend and consumption increased. We watch with interest to see whether this renewed consumer credit confidence extends into Q1 2024, especially with the Chinese New Year period acting as a stimulant for potential further growth activity.”

Lenders tightened personal loan supply

Personal loan origination (new loans issued that are a reflection of both consumer demand and lender supply) volumes fell by 5.5% YoY in Q3 2023 despite new credit enquiries growing over the same period, reflecting the possibility of lenders taking a more cautious approach in this category. When assessing personal loan origination volumes, super prime[5] was the only consumer risk tier where the volume of originations increased (by 11.6%), with volumes across all other tiers declining by between 2.1 and 10.1%[6].

Despite declines in the volume of personal loan originations across most risk tiers, the average value of new personal loans from lower risk (super prime) borrowers increased by 6.5% YoY, indicating that lenders were still able to grow their asset value as outstanding balances for the period increase by 3.4% YoY.

Table 1: Summary of growth in unsecured lending products Q4 2023


Origination Volumes*

YoY Change

Outstanding balances in HKD

Balance YoY Change

Credit cards


160.3 billion


Unsecured personal loans


109.0 billion


Revolving loans


17.6 billion


*Originations reported one quarter in arrears due to data lag and reflects Q3 2023 volumes. Growth reflects movement between Q3 2022 and Q3 2023 for year-over-year comparison.

“Volumes in the personal loans market are primarily driven by moneylenders, who tend to have a greater risk appetite, but recent trends show that they are dialling back on risk, with a greater share new personal loans moving towards less risky segments,” Sun added.  

Younger consumers fuelled demand for revolving lines

Heightened demand for revolving lines was driven primarily by Millennial (born 1980-1994) and Gen Z (born 1995-2004) consumers, with virtual banks responding positively, being responsible for 51% of revolving line originations during Q3 2023, up from 46% in Q3 2022. Total origination volumes increased by 49.4% YoY.

However, the average balance of new credit lines for this product decreased by 41.1% YoY, with overall average balances (new and existing) decreasing by 10.7%. This indicates that these consumers were among the higher risk credit tiers, with lenders are increasing the share of revolving line originations to riskier borrowers, who typically receive smaller lines. This is likely lenders’ decision to manage risk in response to an unusual 72 basis point (from 0.5% to 1.22%) uptick in balance-level delinquencies for this product.

“Consumer preferences for revolving lines may be due to several factors. With interest rates remaining at peak levels, consumers are looking for more affordable options, and the turnaround times for application and approval of revolving line products are usually shorter than credit cards, offering greater convenience. With these factors in mind, it is not surprising to see virtual banks are meeting demand from the younger consumers seeking more affordable and quicker access to credit,” Sun said.

“Given the renewed vigour in consumer spending, and the imminent prospect of interest rate reductions, Hong Kong’s consumer credit market is well positioned for steady expansion,” he added. “Multi-line lenders can focus on leveraging their existing client base for growth opportunities, while lenders seeking to expand their portfolios of offerings have the opportunity to explore untapped market potential.” 

[1] Hongkongers make 1.32 million outbound trips over past 3 days of Christmas break, beating levels recorded before pandemic | SCMP
[2] Double Dates 2023: Spotlight on Singles’ Day | Criteo
[3] Provisional statistics of retail sales for November 2023 | C&SD  
[4] Economic and Trade Information on Hong Kong | HKTDC Research
[5] TransUnion CreditVision® risk score: super prime = AA; prime plus = BB; prime = CC; near prime = DD to HH; subprime = II to JJ. Prime and below = BB to JJ
[6] Subprime originations down 10.1%, near prime origination volume down 2.9%, prime origination volume down 6.2%, prime plus origination volume down 2.1%, super prime origination volume up 11.6%.