Survey Shows Hong Kong Consumers Increased Openness to Lending in 2021
- Impact of the pandemic on household income reduced by 13 percentage points from Q3 to Q4 2021, with 70% of Hong Kong consumers saying their household income was currently unaffected
- Changing macroeconomic environment and consumer habits redefine attitudes to lending. Majority of consumers (65%) believe in the importance of credit and a similar number (61%) say they have sufficient access
The leading global information and insights company TransUnion (NYSE: TRU) today announced the Q4 results from its quarterly Consumer Pulse Survey, revealing a continuation in improving consumer sentiment. In Q4 2021, Hong Kong consumers reported a reduced impact of the COVID-19 pandemic on household incomes compared to the previous quarter. Almost a third (30% – 13 percentage points lower than Q3) of consumers reported their household incomes continued to be impacted, while 68% were optimistic about their finances in the next 12 months, up 26 percentage points from Q3.
The latest Q4 Consumer Pulse Survey polled 1,100 Hong Kong consumers between November 1-18, 2021. During the period, there was no record of locally transmitted Omicron case. The comparison periods are Q3 (survey conducted between August 16-31, 2021) and Q1 (survey conducted between March 5-22, 2021).
Consumer sentiment continued to be driven by economic growth
Over the survey period government figures show Hong Kong’s real GDP growth stood at 5.4% year-on-year and the second installment of the consumption voucher scheme was issued in October1. Both appear to have had a positive impact on results. Seven in 10 (70%) of those taking part in the survey reported their household income was largely unaffected by the pandemic, a 26 percentage points increase compared to the start of the year. The outlook was also increasingly positive with only 43% of respondents expecting household income to be negatively impacted in the future – five percentage points lower than Q3 and 17 percentage points lower than Q1.
Nearly half of consumers (49%) increased their household spending budget – 13 percentage points higher than Q3. In addition, 70% planned to spend the same or more over the festive holiday season compared to the previous year, and 82% expected to maintain or increase their online transactions over the next three months. One-third (33%) of respondents saved more for retirement, which was a 10 percentage points quarter-on-quarter increase.
Confidence in meeting financial obligations has also improved, particularly in comparison to Q1. More than three quarters (78%) said they would be able to pay their bills or loans in full – up 12 percentage points from Q1. Of those who would not be able to meet their obligations, fewer planned to dip into their savings (down three percentage points) or borrow money from friends or family (down 10 percentage points) and instead seek out more flexible options from lenders. Almost a quarter (24%) planned to pay a partial amount (up two percentage points), 18% planned to utilize payment holiday or other accommodation (also up two percentage points), and 17% plan to refinance payments (up four percentage points).
“It is now almost two years since TransUnion began conducting the Consumer Pulse Survey at the start of the pandemic and it has proved to be a valuable barometer of consumer sentiment towards their finances,” said Marie Claire Lim Moore, CEO of TransUnion Hong Kong. “The latest rounds of the survey in 2021 were conducted against a backdrop of a continuously improving economy, a falling unemployment rate and low numbers of locally transmitted COVID-19 cases – all of which resulted in more positive consumer sentiment.”
More consumers believe in the importance of access to credit
The survey also showed an improvement in financial inclusion in Hong Kong over the past year. In Q4, 61% of consumers believed they had sufficient access to credit and lending products, 23 percentage points higher than Q1. Nearly two-thirds of all respondents (65%) said they considered access to credit important in achieving their financial goals (Q1:52%, Q3:50%). Almost two-thirds (65%) of respondents felt it’s extremely or very important to monitor their credit. A large proportion of consumers (72%) monitored their credit situation at least once a month.
Two in five (40%) respondents planned to apply for new credit or refinance existing credit. When calculating credit need by risk segments, prime plus consumers said they had the most need for credit (70%), followed by near prime (68%) and subprime (57%)2. By generation, GenZ had the most need for credit (53%), followed by millennials (44%).
The top three loan products are personal loans, tax loans and revolving loans at 35%, 19% and 18%, respectively. New products, such as buy-now-pay-later (BNPL), have provided customers with different ways to manage their finances. Of those consumers who said they had used a BNPL product one or more times in the last 12 months (63%), most respondents (78%) stated the terms and conditions are easy to understand, and 82% found the service at least somewhat valuable (up 12 percentage points quarter-on-quarter).
“A changing macroeconomic environment and a noticeable shift in consumer attitudes are redefining the lending market,” said Lim Moore. “Although the marketplace is increasingly competitive, there is still uncertainty ahead in the short term due to the spread of Omicron locally. Employing insight-led strategies to understand the evolving needs of customers is going to be key to business growth for banks and lenders.”
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.
1. Latest GDP figures show growth of 5.4% in Q3 2021, following growth of 7.6% in Q2 2021 (source: Census and Statistics Department)
2. TransUnion CreditVision® risk score: super prime = AA; prime plus = BB; prime = CC; near prime = DD to HH; subprime = II to JJ. Prime and above = AA to CC; below prime DD to JJ.