Hong Kong's consumer credit market continued to benefit from improving lender and consumer confidence in the second quarter of 2026, as stronger domestic demand supported balance growth across credit cards and personal loans. New activity reflected a disciplined approach from lenders, with originations increasingly concentrated among lower-risk borrowers, while portfolio performance remained broadly stable to improving.

These insights are drawn from the TransUnion (NYSE: TRU) Hong Kong Industry Insights Report for Q2 2026, a quarter in which GDP grew 4.3%¹, driven by robust exports and resilient domestic demand. Meanwhile residential property prices rose 7.9%² in the first half of the year, reaching their highest level in two and a half years. Consumer confidence also improved, with the value of total retail sales increasing 4.6% year-over-year (YoY)³ in June, led by 20.1% growth in jewellery and valuable gifts and an 11.3% increase in electronic and durable consumer goods.

Credit Card Balances Reflect Renewed Consumer Retail Spending Momentum

Against this positive backdrop, credit card origination volumes rose 6.7% YoY during Q1 2026⁴, with prime plus⁵ consumers recording the highest growth across all risk tiers at 21.1% YoY, followed by super prime borrowers at 6.9%. In addition to strong retail spending and improving macroeconomic conditions, competitive lender promotions during the Chinese New Year holiday season in Q1 also contributed to this growth.

Across generations, Gen Z⁶ accounted for nearly one in four (24.9%) new card originations, up 1.8 percentage points from a year earlier. This aligns with findings from TransUnion’s Q1 2026 Consumer Pulse Study, which showed that among Gen Z consumers intending to apply for new credit or refinance, nearly half (44%) were considering a credit card, up seven percentage points from 2025.

Despite origination growth being driven by consumers in the prime plus and super prime risk tiers, average credit limits on new cards issued declined by 6.3% YoY in Q1 2026, reflecting lenders’ continued underwriting discipline.

Outstanding credit card balances grew 4.3% YoY in Q2 2026, amid sustained consumer spending activity in line with the broader retail trends. Consumers continued to leverage their cards to support consumption needs, driving a 3.4% YoY increase in average balance per consumer.

"Credit card trends in Q2 2026 closely mirror the positive momentum we are seeing in Hong Kong's retail sector," said Weihan Sun, senior director of research and consulting for Asia Pacific at TransUnion. "Lenders continue to meet demand selectively, prioritising lower-risk consumers while maintaining prudent underwriting standards. As consumer confidence improves, capturing and defending share of wallet among prime and above cardholders will be a key opportunity for lenders in the months ahead."

Personal Loan Growth Shifted Towards Higher-Quality Borrowers and Larger Loan Sizes

Although personal loan origination volumes declined slightly by 1.4% YoY in Q1 2026, average loan sizes increased by a significant 9.1% in the same period, driven by greater appetite from larger lenders and a growing share of prime plus and super prime borrowers, whose originations rose 11.7% and 15.5% YoY, respectively. While these better risk tiers still accounted for less than 10% of originations, they contributed disproportionately to the outstanding balance growth of approximately 4.3% YoY, given the larger loan amounts they tend to carry.

While Millennials accounted for the largest share of personal loan originations in Q1 2026 at 42.7%, their strong interest in this product was also reflected in the Consumer Pulse Study. Among Millennials intending to apply for credit or refinance, 42% preferred a new personal loan, up six percentage points from 36% a year earlier, signalling a growing diversification of credit usage among the largest borrower segment beyond credit cards.

Personal loan performance continued to improve across all measures. The largest improvement was seen in consumer-level delinquency, which declined by 7 basis points (bps) YoY to 0.91% (measured as the percentage of consumers with 60 or more days past due, or DPD). The account-level rate decreased by 3 bps to 0.81%, while the balance-level rate fell by 1 bp to 0.52%. This positive trend has been sustained over several quarters, providing lenders with greater confidence to extend credit.

"The personal loan market reflects a meaningful shift in borrower profile," said Sun. "We are seeing greater participation from lower-risk borrowers and proactive lender engagement, supported by improving portfolio performance across all delinquency measures. This combination of quality demand and disciplined supply positions the market well for continued, sustainable growth."

Average Revolving Line Balances Increased Despite Fewer Consumers Carrying Balances

Revolving line activity remained subdued in Q2 2026, continuing a trend of measured market contraction.

Origination volumes in Q1 2026 declined by 7.8% YoY, marking a considerably slower rate of decline than in previous quarters. This sustained contraction in new account originations occurred as the market continued to normalise following the withdrawal of low-limit revolving line products amid elevated delinquencies. With originations now increasingly led by money lenders, whose share increased by 8.2 percentage points YoY, average limits on newly originated accounts grew by 18.4% YoY.

The number of consumers carrying revolving line balances fell 5.5% YoY, while average balances among active borrowers rose 5.9%, indicating continued engagement among consumers who maintain these facilities.

Following several quarters of tightened underwriting by lenders, portfolio performance continued to improve. The account-level delinquency rate (60+ DPD) declined by eight bps YoY, to 0.43%, while consumer- and balance-level delinquency rates fell as well.

Q2 2026 Metrics for Major Consumer Credit Products in Hong Kong

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.

“Looking ahead, lenders have a clear opportunity to capture rising organic demand for credit cards from Gen Z consumers, while defending their top-of-wallet position with prime and above borrowers who continue to drive card origination growth. At the same time, growing wallet diversification among Millennials for personal loans is reshaping engagement strategies,” said Sun. “With improving economic conditions and renewed consumer confidence, lenders that can effectively identify and engage these distinct segments through advanced analytics will be best positioned to deliver sustainable growth in the second half of 2026.”

¹ News.gov.hk: Economy grows 4.3% in Q2

² Rating and Valuation Department: Property Market Statistics

³ Census and Statistic Department: Provisional Statistics of Retail Sales for June 2026

⁴ Origination figures are reported three months in arrears due to reporting lag

⁵ TransUnion CreditVision® risk score: Subprime = JJ to II; Near prime = HH to DD; Prime = CC; Prime plus = BB; Super prime = AA

⁶ Generations are defined as follows: Gen Z, born 1995–2004; Millennials, born 1980–1994; Gen X, born 1965–1979; and Baby Boomers, born 1944–1964

Hong Kong’s consumer credit market showed mixed trends in the first quarter of 2026 as credit cards and personal loans remained broadly stable, supported by healthy outstanding balance growth and steady repayment performance. However, revolving lines and loans on card continued to contract, reflecting more selective lender activity and softer demand in those segments.

These insights and others are shared in the TransUnion (NYSE: TRU) Hong Kong Industry Insights Report for Q1 2026, which also showed that credit delinquency trends remained largely stable or improved, suggesting prudent repayment behaviour among consumers, while lenders’ disciplined underwriting and portfolio management continued to support credit quality. This is in the context of a steady inflation rate, at 1.7% for February and March¹, and a 5.9% GDP growth² in the quarter – the strongest in nearly five years.

Credit Card Spend Remained Strong

Hong Kong’s credit card market remained stable, with outstanding balances and average balance per consumer increasing during the first quarter of the year, despite a decline in total card accounts. Outstanding card balances rose 4.9% year-over-year (YoY), and average balance per consumer increased 3.6% YoY, reflecting sustained spending momentum. The total number of card accounts declined by 2.1% YoY, due in part to the closure of dormant accounts, by lenders, which contributed to a 3.4% YoY decline in average total card credit limit per consumer.

Origination trends also improved; although new account volumes were slightly lower YoY, at -1.1% in Q4 2025³, this was a slower rate of decline than was seen in previous quarters. The market saw a growing contribution from younger consumers as Gen Z⁴ accounted for nearly three in ten (29.4%) new card originations, up from 26.3% a year ago, indicating continued participation from this segment as labour market conditions improved.

From a risk perspective, credit card performance remained steady. Delinquency rates were broadly unchanged at the account and consumer level, while balance-level delinquency rose by only one basis point YoY to 0.23%.

“The credit card portfolio reflects a healthy balance of resilient spending and stable risk,” said Weihan Sun, senior director of research and consulting for Asia Pacific at TransUnion. “This was likely due to a surge in domestic demand, with private consumption estimated to have grown by around 5.0%⁵ YoY, supported by a calendar of government-backed ‘mega events’ as well as a steady return of live entertainment and conferences. Card issuers would benefit from ensuring that their account management programs are focused on maintaining or increasing their share of wallet to drive profitable balance sheet growth,” added Sun.

Personal Loans Growth Driven by Larger Loan Sizes Despite Softer Originations

New personal loan amounts increased 12.1% YoY during Q1 2026, supporting a 3.6% YoY growth in total outstanding balances, while total personal loan accounts rose 1.3% YoY. Average balance per consumer climbed 2.7%, and the number of consumers with an open personal loan account edged up 1.6%. These findings show that lenders are focused on enabling greater access in the personal loan market, led by improvements in performance trends.

Delinquencies declined at both account (down by two basis points to 0.84%) and consumer level (down by five basis points to 0.95%). Balance-level delinquency also improved by two basis points to 0.55%. Taken together, these findings show the personal loan segment experienced stable underlying demand, higher supply amounts and improving portfolio performance.

“The personal loans market was resilient during 2025, although originations slowed down by three percent during the last quarter of the year,” Sun said. “The market was largely resilient in terms of demand and supply throughout 2025 despite that slowdown in Q4, but demand further picked up again in the first quarter of 2026 when enquiries for new loans increased by 2.7% YoY. The growth in the number of consumers carrying a balance shows that there is still good engagement with this product. Lenders would benefit from identifying consumers who have the propensity to open personal loans by leveraging consumer trended attributes.”

Revolving Line Originations Contracted Sharply with Balances Declined

In contrast to the stable origination trends in credit card and personal loans, revolving line originations declined 40% YoY, continuing a trend seen throughout 2025 after some digital banks scaled back low-limit product offerings following elevated delinquencies. Originations increasingly were led by traditional lenders and money lenders, where line assignments tend to be larger. As a result, the average limit on newly originated accounts increased by 24.8% YoY.

The number of consumers carrying a revolving line balance decreased by 9.7% YoY, and outstanding balances decreased by 1.6% YoY. However, younger consumers continued to show interest in revolving credit, with Gen Z representing nearly one in three (32.9%) originations.

Account-level delinquencies improved by eight basis points to 0.44%, while consumer-level delinquencies improved by 13 basis points. These changes reflect both portfolio cleanup and a more cautious lending environment, which are likely to lead to a recovery in these products as volumes and limits become normalised.

“As outstanding balances continued to decline amid encouraging performance trends, the revolving line segment appears to be stabilising as lenders focus on more sustainable growth, including addressing consumer behaviour on high delinquency small facility products,” said Sun.

Loan on Card Originations Contracted and Balances Declined

Loan on card activity continued to moderate, extending a trend seen through much of 2025. Origination volumes declined by 28.3% YoY in Q4 2025 as some lenders reduced campaign activity. This pullback contributed to a 12.3% YoY decline in total loan on card accounts and a 5.6% YoY drop in outstanding balances in Q1 2026. The number of consumers with an active balance also declined 12.6%, reinforcing the view that both supply and demand softened in this segment.

At the same time, the consumers who continued to use the product utilised larger share of open lines. Average opening balances increased 11.7%, and the average balance per consumer rose 8.0%. This indicates that while fewer consumers were using loan on card, those who remained active were borrowing higher amounts and carrying larger balances.

“Hong Kong’s consumer credit market continued to show a measured and differentiated pattern across products during the first quarter of the year,” Sun said. “Resilient spending and balance growth in credit card and personal loans are helping support market stability, while moderated usage in revolving lines and loan on card reflects more selective activity rather than broad-based deterioration.”

Q1 2026 Metrics for Major Consumer Credit Products in Hong Kong

 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.

“These trends reflect that the Hong Kong financial services market is becoming more balanced rather than broadly expansionary,” said Sun. “For lenders, the priority in 2026 will be to capture growth in stronger segments while maintaining discipline in underwriting and portfolio management. The mix of improving domestic consumption and changing borrower behaviour is likely to reshape credit demand across both secured and unsecured products. In this environment, staying close to emerging opportunities and risks, while acting swiftly on data-driven insights and analytics, will be critical to navigating an increasingly nuanced landscape.”

1 Info.gov.hk: Consumer Price Indices for February and March 2026

2 News.gov.hk: Economy grows 5.9% in Q1

3 Origination figures are reported three months in arrears due to reporting lag

4 Generations are defined as follows: Gen Z, born 1995–2004; Millennials, born 1980–1994; Gen X, born 1965–1979; and Baby Boomers, born 1944–1964 

5 Info.gov.hk: Advance estimates on Gross Domestic Product for first quarter of 2026

Hong Kong’s consumer credit market remained resilient with growth momentum anchored in secured lending in Q4 2025, as both mortgage and auto loan portfolios expanded. Credit card balances rose on the back of higher utilisation, with retail sales in Hong Kong recording continued growth over the second half of the year¹.

These insights and others are shared in the TransUnion (NYSE: TRU) Hong Kong Industry Insights Report for Q4 2025². The report further showed that while consumers held fewer credit products, they used those existing products more actively, placing greater emphasis on product fit, pricing and ongoing engagement. Market growth across categories was shaped less by new account acquisitions (supply) and more by consumers’ needs and priorities (demand).

Mortgage Market Shows Clear Signs of Rebound

The mortgage market displayed early recovery signals in Q4 2025, supported by the current low Hong Kong Monetary Authority base rate. The number of active mortgage accounts increased 3.6% year-over-year (YoY), reflecting a recovering housing market and improving borrower confidence. Origination volumes during Q3 2025³ jumped 44.1% YoY, off relatively low volumes in the corresponding 2024 quarter, indicating a meaningful re‑acceleration in new lending. This is supported by data from Centaline Property that shows the number of private primary residence transactions more than doubled YoY during Q3 2025, and that the number of private secondary residential transaction increased by 55% YoY⁴.

Despite overall growth, mortgage lending remained conservatively positioned, with low-risk super prime⁵ consumers holding 67.2% of all mortgage accounts, slightly higher than the previous year. Higher‑risk exposure stayed minimal.

Among generational cohorts, the greatest growth in originations was among Gen Z⁶ and Baby Boomer consumers, at 1.6% and 5.7% YoY, respectively. Originations by Millennial and Gen X consumers declined by 5.9% and 1.4% YoY, respectively.

“Mortgage activity is recovering in a healthy and disciplined way and is likely to see further activity based on improved affordability as a result of the Hong Kong Monetary Authority’s current lower base rate environment. Lenders could benefit from predicting their customers’ needs for a new mortgage or a refinance activity by better understanding shifts in holistic consumer repayment, leveraging and borrowing behaviours.” said Weihan Sun, principal of research and consulting for Asia Pacific at TransUnion. 

Auto Loan Growth Driven by Wider Borrower Participation

The auto loan sector continued to expand, with originations during Q3 2025 increasing 28.2% YoY, reflecting improved demand for vehicle financing. This was likely driven by the Hong Kong government’s One-for-One Replacement Scheme⁷ which is currently set to end on March 31, 2026, in support of its target of ceasing new registrations of fuel-propelled cars, including hybrid vehicles, by 2035 or earlier⁸. The number of electric vehicles purchased during Q3 2025 was nearly double the number purchased in the same quarter in 2024⁹.

Although super prime borrowers still dominate new auto loans (51.7% of originations), their share declined slightly, down from 53.6% in the prior year, as more near prime and subprime consumers entered the market – near prime originations increased from 10.9% to 14.7% and subprime originations increase from 1.0% to 2.9%. These increases led to smaller average new loan values and reinforce the importance of risk based pricing and tight portfolio monitoring.

The total number of open auto accounts grew 21.8% YoY during Q4 2025, while the number of consumers carrying an auto loan increased 22.5% YoY. Outstanding auto loan balances rose 14.8% YoY, even as the average balance per consumer fell 6.1% YoY, confirming that expansion is being driven by both increased participation and balance growth.

“The auto loan market continued to scale as more consumers felt confident opening loans to purchase vehicles — primarily fuelled by government support. While the latest 2026-27 Budget has announced the conclusion of the One-for-One Replacement Scheme, this may further stimulate market demand in the first quarter of 2026, and future growth in auto loans will depend on the introduction of potential new incentives,” said Sun.

Credit Card Growth Reflects Higher Utilisation and Portfolio Consolidation

The credit card market showed utilisation‑led balance growth in the context of consistently growing retail sales, which recorded YoY increases of 5.3%, 4.4% and 5.1% in October, November and December 2025¹. While the number of active credit card accounts declined modestly by 1.5% YoY, outstanding balances rose by 2.5% YoY. Consumers’ average credit limits fell slightly by 3.4% YoY, largely due to the roll‑off of closed or inactive accounts rather than broad-based tightening by card issuers.

The number of consumers with active credit card accounts and those carrying balances increased by 0.57% and 0.81% YoY, respectively, highlighting deeper engagement with preferred card products.

“Top‑of‑wallet relevance has never been more critical for Hong Kong card issuers,” Sun said. “Balance growth is increasingly determined by whether a card is central to a consumer’s everyday spend, rather than by the number of accounts they hold. Lenders can maintain their top-of-wallet position through proactive strategies designed to encourage consumer loyalty, especially as their needs change with economic cycles.”

Personal Loans Show Steady, Risk‑Segmented Expansion

The unsecured personal loans market recorded modest growth across accounts, balances and active borrowers. The number of accounts rose 0.9% YoY and outstanding balances increased 2.9% YoY in Q4 2025. Average balances per consumer climbed 1.8% YoY, indicating steady demand for instalment credit without signs of rapid acceleration.

Origination patterns in Q3 2025 continued to lean toward near prime and subprime borrowers, who accounted for 47.5% and 28.3% of originations, respectively. Average new account balances rose 7.5% YoY in Q4 2025, as larger loan amounts indicated widening appetite from traditional banks to offer this product.

“The unsecured personal loans market is expanding in a measured way, with higher‑risk tiers driving much of the growth,” Sun said. “Disciplined risk‑based pricing and close monitoring of subprime performance remains important, particularly as higher average loan sizes in new originations increase potential loss exposure.”

Q4 2025 Metrics for Consumer Credit Products in Hong Kong

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.

iv. Source: HKMA Residential Mortgage Survey

Despite some structural shifts, credit quality remains resilient across the system, with delinquency rates stable or improving across most products. Where pressure exists, it remains limited and concentrated in subprime segments.

“Hong Kong is entering a phase of optimisation rather than broad-based expansion,” said Sun. “We saw lenders ending 2025 by optimising their portfolios, positioning them well for growth in 2026. Going forward, they will need to focus on strategic capital allocation, defending top‑of‑wallet positions and maintaining disciplined risk management as portfolios rebalance.”

¹ Trading Economics: Hong Kong Retail Sales YoY

² TransUnion's last Industry Insights Report for Hong Kong in 2025 is based on data from the Credit Reference Platform under Credit Data Smart (CDS), following the full migration by the end of November 2024. Future reports will continue to leverage data from this source

³ Origination figures are reported three months in arrears due to reporting lag

⁴ Centaline Property: Statistics of Properties Transactions in Land Registry

⁵ TransUnion CreditVision® risk score: Subprime = JJ to II; Near prime = HH to DD; Prime = CC; Prime plus = BB; Super prime = AA

⁶ Generations are defined as follows: Gen Z, born 1995–2004; Millennials, born 1980–1994; Gen X, born 1965–1979; and Baby Boomers, born 1944–1964 

⁷ Transport Department – The Government of Hong Kong Special Administrative Region: First Registration Tax Concessions for Electric Vehicles 

⁸ News.gov.hk: Electric vehicles roadmap updated

⁹ Hong Kong Electric Vehicle Database: Hong Kong Electric Vehicle Statistics 2024 and Hong Kong Electric Vehicle Statistics 2025, total for Q3 2024 = 5,582, total for Q3 2025 = 9,125

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 

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.

1 TransUnion's third Industry Insights Report for Hong Kong in 2025 is based on data from the Credit Reference Platform under Credit Data Smart (CDS), following the full migration by the end of November 2024. Future reports will continue to leverage data from this source

2 Origination figures are reported three months in arrears due to reporting lag

3 TransUnion CreditVision® risk score: Subprime = JJ to II; Near prime = HH to DD; Prime = CC; Prime plus = BB; Super prime = AA

4 Generations are defined as follows: Gen Z, born 1995–2004; Millennials, born 1980–1994; Gen X, born 1965–1979; and Baby Boomers, born 1944–1964 

5 Census and Statistics Department: Unemployment and underemployment statistics for July – September 2025 

6 Trading Economics: Hong Kong Youth Unemployment Rate

7 Hong Kong Economy: Latest Developments

8 CBRE: Hong Kong Figures – Retail Q3 2025

9 Government of the Hong Kong Special Administrative Region: Provisional Statistics of Retail Sales for September 2025

10 Midland Realty: Private residential rents rose further in June and are expected to reach a new peak in Q3 (only available in Traditional Chinese)

11 S&P Global Market Intelligence shared subscription-based data with TransUnion Hong Kong

Insights from TransUnion’s (NYSE: TRU) Hong Kong Industry Insights Report for Q2 2025¹ show that the credit market experienced growth in personal loans and mortgage originations during the quarter, while credit card and revolving line activities declined significantly. These declines in new consumption-led products were likely driven by consistently elevated unemployment across the population, especially among younger consumers², while older cohorts appeared to shift their focus towards maintaining larger property loans.

Credit card originations during Q1 2025 declined by 17.9% year-over-year (YoY) while enquiries fell by 2.5%³. This signalled weaker demand and, more importantly, increased lender caution towards new card acquisitions. Due to lower originations, total open credit card accounts at the end of Q2 2025 fell 1.5% YoY.

From a borrower risk perspective, new card originations by subprime⁴ consumers rose 9.9% YoY, albeit from a low base and primarily driven by money lenders. All other risk tiers recorded double-digit decreases. A similar trend was observed in the existing credit portfolio, where the volume of cards held by subprime borrowers increased by 8.7% YoY – an unusual scenario in this typically risk-averse market.

“The growth in subprime cardholders may be an indication that lenders are seeing fewer high-quality prospects in the market,” said Weihan Sun, principal of research and consulting for Asia Pacific at TransUnion. “It might also reflect a shrinking pool of borrowers who meet the appetite of traditional lenders, which may warrant attention. At the same time, high credit card ownership among prime plus and super prime segments is further constraining growth opportunities for lenders.”

With growth opportunities narrowing among prime segments, attention is shifting to subprime borrowers. Delinquencies, measured as the percentage of accounts with 90 or more days past due (DPD), remained steadily low at 0.03%. However, the continued growth in new subprime accounts is worth closer monitoring, as these are more likely to carry higher risk of delinquencies in the future.

Delving more deeply into the slowdown in credit card growth, originations among Gen Z consumers⁵ declined by 1% YoY, with only money lenders showing YoY card growth among issuer types. This slowed new card activity among younger consumers was likely, in part, due to youth unemployment having reached a high of 6.8% in Q2 2025² – the highest since December 2022 – as recent graduates entered a saturated job market.

“Elevated youth unemployment is a leading indicator for what lenders can expect of credit market growth activity over the next six to 12 months,” Sun said. “Lenders should revisit their originations strategies in the coming months and identify growth opportunities among the younger generation, given the reduced participation and demand from Gen Z borrowers.”

Revolving lines growth slowed

Following significant growth during 2024, revolving line originations declined by 17.8% YoY in Q1 2025, signalling waning demand, likely brought about by subdued lender campaign activity due to climbing delinquencies. Account-level delinquencies (60+ DPD) were up 14 basis points (bps) YoY to 0.51%, while consumer-level delinquencies over the same period increased 26 bps to 1.06%.

Revolving lines are particularly popular among younger consumers because of their convenience, with quicker applications that enable immediate liquidity, and typically have smaller ticket sizes. Given the product concentration among younger borrowers, Hong Kong’s current youth unemployment situation has likely been a driver of slower growth in revolving lines.

This pullback has impacted the share of accounts issued by digital banks, who have been successful in attracting younger consumers in recent years. Originations by digital banks fell by 45.4% YoY in Q1 2025. Meanwhile, money lenders capitalised on opportunities for integration into e-wallets on online retail platforms, resulting in 44.4% YoY originations growth and reflecting a significant share shift in the second quarter.

In contrast, traditional banks, which do not participate significantly in this product, saw a 34.5% YoY growth in originations off a low base while targeting lower-risk, higher-ticket borrowers: digital banks’ typical revolving lines were between HK$5,000 and HK$8,000, while those offered by traditional banks are usually approximately HK$200,000.

“Revolving line growth by traditional banks is largely driven by consumers seeking flexible liquidity for unforeseen needs. These higher-value loans are typically opened with traditional banks that are more willing to extend larger credit limits. While consumers may not draw down on these loans immediately, they value having access for emergencies or investment opportunities,” Sun said. “Lenders looking to expand in this space should align risk-based pricing with their appetite and strengthen account management using data-driven early warning indicators. A comprehensive toolset that quickly surfaces shifts in risk and opportunity can support better acquisition strategies and inform decisions across credit limits, interest rates and payment terms.”

Mortgage market grew, reflecting increased consumer confidence

The slowdown in consumption-led credit originations for credit cards and revolving lines may be partly attributed to Hong Kong residents responding to policy changes that encourage property sales, such as stamp duty cuts, reduced transaction costs⁶, and the availability of fixed-rate mortgages. These incentives have prompted consumers to redirect their disposable income toward servicing mortgages or to home improvements.

In Q2 2025, mortgage origination volumes increased by 4.6% YoY, while the number of accounts increased by 3.3%, according to the Hong Kong Monetary Authority (HKMA)⁷. However, the average value of new mortgages declined by 9.5%, and total outstanding balances increased by just under 1%.

With thousands of new flats, many attractively priced, expected to be available during 2025, increased activity in the region’s property market is likely to improve consumer confidence.

Modest gains in personal loans

Personal loan originations grew by 2.1% YoY in Q1 2025 as lenders met increasing demand, with total account volumes and outstanding balances showing modest gains of 1.2% and 0.9% YoY, respectively. Among all personal loan accounts, subprime volume increased by 7.8%, likely suggesting greater appetite among higher-risk consumers seeking liquidity or aiming to diversify their wallets.

While lenders are taking on more risk by expanding access to personal loans, their strategy of offering lower value loans (average new loan value decreased by 2.0% YoY in Q1 2025) has contributed to improved delinquency performance: 60+ DPD account-level delinquencies fell by four bps to 0.84%, while consumer-level delinquencies over the same period improved by seven bps to 0.98%. This marks the third consecutive quarter of improvement, reinforcing lender confidence in further expansion.

“Lenders seeking to unlock more value among consumers who hold a single credit product should focus on deepening engagement through retention strategies and targeted cross-selling campaigns,” said Sun. “By embedding early default detection and monitoring tools into underwriting processes, lenders can proactively manage risks and strengthen portfolio resilience, laying the foundation for sustainable growth in a more diverse credit landscape.”

Q2 2025 Metrics for Major Consumer Credit Products in Hong Kong

 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.

iv. Mortgage data sourced from the HKMA

1 TransUnion's second Industry Insights Report for Hong Kong in 2025 is based on data from the Credit Reference Platform under Credit Data Smart (CDS), following the full migration by the end of November 2024. Future reports will continue to leverage data from this source

2 Census and Statistics Department: Table 210-06103 : Unemployment rate and underemployment rate by age and sex

3 Originations and enquiries are viewed one quarter in arrears to account for reporting lag

4 TransUnion CreditVision® risk score: Subprime = JJ to II; Near prime = HH to DD; Prime = CC; Prime plus = BB; Super prime = AA

5 Generations are defined as follows: Gen Z, born 1995–2004; Millennials, born 1980–1994; Gen X, born 1965–1979; and Baby Boomers, born 1944–1964 

6 info.gov.hk: Government welcomes passage of Stamp Duty (Amendment) Bill 2025

7 According to the Hong Kong Monetary Authority releases on mortgage data from April to June 2025

Soft retail spending in Hong Kong drained growth momentum from the territory’s credit card market, with originations down 4.5% YoY in the last quarter of 2024[1]. The slowed retail spending, in its thirteenth month[2] of negative growth, will likely impact originations activity in the first quarter of 2025. Despite a decline in new card growth, the number of accounts and outstanding balances declined only very slightly in the first quarter of 2025, down 1.1% and 0.1% YoY, respectively. These are some of the insights reflected in TransUnion’s (NYSE: TRU) Hong Kong Industry Insights Report for Q1 2025[3].

Even as the number of credit card accounts in Hong Kong was close to static, the profile of cardholders was evolving, with originations among Gen Z consumers[4]  increasing by 10.2% YoY, boosting their share of total originations to 26.9% and surpassing the originations by Gen X consumers for the first time.

Looking at lender types, consumers increasingly turned towards non-bank lenders for credit card originations. In Q4 2024, 80.4% of credit card originations were from traditional banks, down from 83.2% the previous quarter.

With 93.7% of Hong Kong cardholders in prime[5] and above risk tiers, delinquencies also remained consistent with prior year levels, with balance-level delinquencies in Q1 2025 at 90 days past due (DPD) seeing only a two basis point (bps) YoY uptick to 0.21%.

Personal loan originations surged, but shifted towards smaller value loans

The TransUnion Industry Insights Report also shows that Hong Kong’s personal loan market rebounded in volume during Q4 2024, with originations up 6.6% YoY, although the average opening loan amount for new loans in Q4 2024 was 2.9% less YoY.

The volume growth was more substantial among Gen Z consumers – up by 35.4% YoY, accounting for 15.5% of originations and a share increase of 3.3 percentage points YoY. At the same time, originations to subprime consumers continued to decrease while those to all other risk tiers increased, indicating that lenders increased their focus on less risky consumers.

Consumers continued to shift away from traditional banks for new personal loans: money lenders accounted for 51.7% of originations, with traditional banks providing 40.7% of new personal loans. Although coming off a low base, originations by digital banks more than doubled YoY, with their share of personal loan originations increasing to 7.6%, up from 3.4% over the same period in the previous year.

“Although lenders extended more new personal loans, the size of loans decreased. This indicates that although lenders are willing to meet demand, they are doing so with caution. For lenders, there is opportunity to meet consumer demand with disciplined risk-based pricing and bundling strategies, along with early detection tools to mitigate default risk,” said Weihan Sun, principal of research and consulting for Asia Pacific at TransUnion.

Revolving line demand softened as lenders shifted towards higher-limit, lower-volume strategies

Revolving line originations volumes contracted YoY as performance metrics continued to deteriorate, prompting lenders to re-evaluate their growth strategies in the context of persistent high delinquency levels and charge offs. This was of particular note among digital banks, where there has been a sharp slowdown from double-digit growth in prior quarters.

Origination volumes decreased by 7.9% YoY in Q4 2024, with average limits on new accounts decreasing sharply by 38.4% YoY in the quarter. This drop was primarily due to lower originations from digital banks (down by 29.5% YoY), likely due to deteriorating performance for recent originations, particularly among the near prime consumer risk tier. Delinquency performance across near prime consumers at 30 DPD after six months on book was 2.29% for Q1 2024 originations, 2.98% for Q2 2024 originations, and 3.07% for Q3 2024 originations. The deterioration was sharper among digital bank revolving lines, with performance under the same terms being 2.07% for Q1 2024 originations, 3.32% for Q2 2024 originations, and 3.46% for Q3 2024 originations.

This more cautious lending approach was potentially a reaction to increased delinquencies, up by 15 bps YoY to 0.52% at an account level, while consumer-level delinquencies for the same period were up by 28 bps YoY to 1.06%. These higher delinquencies were likely because revolving lines are lower in consumers’ payment hierarchies, with bigger-ticket or secured loans taking priority.

“Digital banks’ revolving line originations volumes decreased by nearly one third during the latest quarter as these lenders adapted their lending strategies in response to increased delinquencies, prioritising more resilient consumers,” said Sun. “At the same time, traditional banks and money lenders recorded increases in their share of originations as a result, with money lenders leading in volume and share shift as they took up opportunities declined by digital banks. This reflects a deliberate shift towards higher-limit, lower-volume lending to better-risk borrowers in a strategic response to increased defaults for this product.”

Mortgage growth accelerated amid continued property market correction

The Hong Kong Monetary Authority (HKMA) reported that mortgage originations rebounded sharply in Q1 2025[6], This increase was likely due to supportive polices following HKMA’s relaxing of loan-to-value rules, allowing up to 70% loans for most residential properties[7], as well as more buyer-friendly pricing and stable interest rates.

According to the Global Property Guide, Hong Kong’s residential property price index has experienced 13 consecutive quarters of YoY price falls, which when adjusted for inflation, means that property prices in the territory have declined by 9.0% over the same period, and are down nearly 30% from 2021 peaks[8].

In the context of this environment, mortgage origination volumes as published by HKMA increased by 18.7% YoY, and the average value of new mortgages increased by 9.6% YoY in the same quarter, while the number of outstanding accounts increased by 22.4% YoY in the period.

“This resurgence in the Hong Kong property market creates an atmosphere that is particularly favourable for first-time home buyers, for whom affordability has long been a challenge,” said Sun. “As more people buy homes, increased property ownership is likely to drive growth in other credit products, as new homeowners will likely need to expand their credit wallets with personal loans to purchase bigger ticket items such as appliances or larger décor elements, or they may turn to a revolving loan or credit cards to fund renovations. These developments may serve as a catalyst for renewed momentum across the broader credit landscape.”

 
1 Originations and enquiries are viewed one quarter in arrears to account for reporting lag

2 C&SD: Table 620-67001: Total Retail Sales

3 TransUnion's first Industry Insights Report for Hong Kong in 2025 is based on data from the Credit Reference Platform under Credit Data Smart (CDS), following the full migration by the end of November 2024. Future reports will continue to leverage data from this source.

4 Generations are defined as follows: Gen Z, born 1995–2004; Millennials, born 1980–1994; Gen X, born 1965–1979; and Baby Boomers, born 1944–1964 

5 TransUnion CreditVision® risk score: Subprime = JJ to II; Near prime = HH to DD; Prime = CC; Prime plus = BB; Super prime = AA

⁶ According to the Hong Kong Monetary Authority releases on mortgage data from January to March 2025

7 Hong Kong Monetary Authority: Countercyclical Macroprudential Measures for Property Mortgage Loans

8 Finimize: Hong Kong Home Prices Sink Amidst Economic Strain  

With a broader range of banking and other financial tools at their fingertips, Hong Kong consumers now have an even wider choice of payment solutions, empowering them to expand their wallets with digital offerings. According to the findings of the latest TransUnion (NYSE: TRU) Hong Kong’s Industry Insights Report for Q3 2024, consumers are also being further incentivised by rewards and discount vouchers, while digital platforms’ ease of use, broad acceptance for payments and quick responses to requests for credit are encouraging adoption.

This shift is most notably reflected in the 154% year-over-year (YoY) increase in enquiries for revolving lines compared to Q2 2024, and a 107.3% YoY increase in revolving line originations[1] for the same time period. Lenders that have integrated their offerings through digital wallets focused more on smaller ticket size opportunities optimised for convenience; this observation is supported by the insight that, despite the significant increase in originations, average new account credit lines decreased by 42.8% YoY during Q2 2024.

“Providers that offer digital wallet pay-later solutions are capturing an increasing share of wallet, with Hong Kong now past more than half a million consumers holding active revolving line products,” said Weihan Sun, principal of research and consulting for Asia Pacific at TransUnion. “Lenders who are digitally agile and connected with digital native audiences are continuing to see growth. Consumers are prioritising convenience, which is an important differentiator in a very mature market.”

A recent Mastercard study found that affluent consumers make carefully considered payment decisions for every transaction, so that they can earn points, rewards and discounts, with 79% of Hong Kong affluent consumers keeping credit cards at the top of their payment wallets. The study also found that Hong Kong’s affluent consumers expect to increasingly use alternative payment methods, including digital wallets stored online, biometric payments and scanning a QR code or barcode.

Lenders offering greater rewards to capture a greater share of spend

Hong Kong’s credit card market saw a 12.3% YoY growth in enquiries (a measure of demand) and a 12.7% growth in originations (accounts opened) during Q2 2024, although the average limit on new cards was lower by 8.7% YoY. Along with low and stable delinquency rates at account and consumer levels, this suggests that card issuers have a healthy appetite to offer additional credit to consumers who demonstrate consistent repayment behaviours, highlighting opportunities to expand access responsibly within a stable risk environment.

According to TransUnion’s Q3 2024 Consumer Pulse Survey[2], 45% of Hong Kong consumers plan to apply for a new credit card in the next 12 months, with other products on their horizon including new personal loans (34%) and new pay-later loans (27%).

“The double-digit increase in demand for credit cards during the second quarter was likely also driven by lenders expanding their rewards offerings to build and retain loyalty and top-of-wallet status,” said Sun. “Hong Kong consumers are very strategic in how they leverage their payment options to capture the greatest returns, and they seek reassurance that their financial services providers understand their needs and support their ambitions. These could be for discounts on sought-after items, or rewards that will help them realise their dreamed-of experiences.”

With more convenient digital solutions and expanded rewards offerings enticing more consumers to originate credit products, TransUnion data also shows a 75% YoY growth in New-to-Credit (NTC) consumer originations (consumers who originated their first-ever credit product), with a 240% YoY growth in revolving lines and an 85% YoY growth in credit card originations among this consumer segment. This is comprised of organic growth from both Gen Z consumers[3] entering the credit market, as well as from older NTC expatriates who have moved to Hong Kong, demonstrating that there are still meaningful opportunities for growth in Hong Kong’s mature market when lenders adapt to consumers’ expectations and behaviours. 

Lenders maintained strict underwriting as personal loan demand outpaced supply

Lenders upheld stricter personal loan underwriting standards in Q2 2024 in response to previous quarters’ deteriorations in delinquency; enquiries increased 3.8% YoY during the quarter, while originations decreased by 4.6%.

This conservative approach has contributed to a reduced share of subprime[4] originations, with loans offered to this risk tier falling from 29.6% of all personal loans granted in Q2 2023 to 27.8% in Q2 2024. Due to tighter underwriting standards, account-level delinquencies (60 days past due) improved by five basis points YoY during Q3 2024, to 0.82%.

While the average number of personal loans per consumer (for those who hold one or more personal loans) has remained fairly stable between 1.4 and 1.5 per consumer since Q2 2019, the number of personal loans per subprime consumer (those with higher risk) had increased to 2.4 per subprime consumer since Q4 2022. In 2024, the number of personal loans per subprime consumer slightly decreased to 2.2 per consumer. At a time when loans per consumer reached the high of 2.4, 60 days past due account-level delinquencies peaked at 0.83% in Q3 2023. That trend of delinquencies has remained mostly stable since then, revealing insight into lenders’ caution in granting new loans to riskier consumers.

This risk tightening led to a decline in subprime borrowers’ share of personal loan originations across lender types. 45% of money lenders’ loans were issued to borrowers in the subprime risk tier in Q2 2024, down slightly YoY by one percentage point, and for digital banks, the share of subprime originations was down three percentage points from 14% in Q2 2023 to 11% in Q2 2024.

“Unsecured personal loans are the only product that has a sizeable subprime borrower base in Hong Kong, with this product designed and targeted for higher-risk consumers by money lenders who generally have a more expansive risk appetite,” said Sun. “Due to the risk profile of the majority of these borrowers, lenders have tightened their underwriting practices for this product in response to profitability pressures and to protect their overall portfolios from deteriorating. The key to sustainable lending growth in this sector remains in identifying early signs of risk, predicting which consumers are more likely to perform well, and enabling consumer credit education to fuel economic growth.”

Table 1: 2024 Q3 Metrics for Major Consumer Credit Products in Hong Kong

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.

¹ Originations and enquiries are viewed one quarter in arrears to account for reporting lag 

² TransUnion’s Consumer Pulse Survey Hong Kong of adults aged 18 and older was conducted 15-31 July 2024 by TransUnion in partnership with third-party research provider, Dynata

³ Generations are defined as follows: Gen Z, born 1995–2004; Millennials, born 1980–1994; Gen X, born 1965–1979; and Baby Boomers, born 1944–1964 

⁴ TransUnion CreditVision® risk score: Subprime = JJ to II; Near prime = HH to DD; Prime = CC; Prime plus = BB; Super prime = AA 
 

Against a backdrop of positive macroeconomic indicators in Hong Kong, including a 3.3% growth in GDP and a 7.5% year-over-year (YoY) growth in exports¹, the local credit market remained healthy during Q2 2024. Although origination growth slowed somewhat across all credit products apart from revolving lines, consumer balances on existing credit facilities increased during Q2 2024 as consumers used credit to fund summer travel and offshore spending, aligned to the trends observed in the tourism sector².  

These are some of the findings of TransUnion (NYSE: TRU) Hong Kong’s latest Industry Insights Report for Q2 2024, which provides lenders with insights into the current trends driving the local credit market.

“The Hong Kong credit market showed both growth and caution during the second quarter, as lenders focused on higher-quality borrowers to manage risk, while consumers continued to demonstrate responsible borrowing habits,” said Weihan Sun, Principal of Research and Consulting for Asia Pacific at TransUnion.

The credit card market continued to experience mixed trends during this quarter, with a 5% YoY decline in inquiries, which reflects reduced demand for new cards. Card originations increased slightly by 0.6% YoY during Q1 2024³ (the most recent quarter for which originations data are available). Although the YoY change in originations was marginal, the comparative period of Q1 2023 saw substantial volumes due to Hong Kong’s re-opening during that quarter, indicating that the participation rate for cards remains steady despite waning demand. Gen Z⁴ consumers’ share of card originations (20%) increased by 3.4% YoY as more consumers reached adulthood and began their credit journey.

Lenders exercise caution amid summer season spending

Amid a shift towards more subdued local retail consumer spending patterns⁵, lenders were also cautious, with the average credit limit extended on new cards to consumers during the period falling by 7.8% YoY, a trend observed across all risk tiers⁶. The shift in origination mix among consumer risk tiers is particularly significant, as prime plus and super prime borrowers accounted for 77.1% of total originations in the most recent quarter, reflecting a 1.6% upward shift from the previous year. This trend indicates that lenders are increasingly focusing on higher-quality borrowers, which can help mitigate credit risk but may also limit access for consumers with lower credit scores.

Despite the slowdown in originations growth during Q1 2024, outstanding balances on credit cards increased by 7% YoY during Q2 2024, with average balances per consumer increasing by 4.9%. This growth in balance activity in part reflects the increased overseas travel and offshore spending over the summer period, and indicates that despite lower demand for new credit cards, consumers continue to actively use the existing cards in their wallets. At the same time, the number of consumers carrying a balance grew by 2% YoY, likely driven by the continued influx of new Gen Z cardholders.

Recent momentum for loans on cards slowed after consecutive quarters of significant YoY growth, with originations decreased by 7.8% YoY during Q1 2024. Prime and above risk tiers accounted for 68.7% of originations, reflecting a 2% increase from the prior year, indicating that lenders extended these facilities to higher-quality borrowers, which can help mitigate risk. Even though outstanding balances increased slightly YoY in Q2 2024, by 0.7%, the average balances per consumer for the period decreased by 2.1% YoY. The number of consumers carrying a balance increased by 2.9% over the same period, but on average their balance was of lower value.

Table 1: 2024 Q2 Metrics for Major Consumer Credit Products in Hong Kong

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 a balance level except loan on card, which is reported at an account level. 

Despite a 1% increase in personal loan inquiry volumes, originations decreased by 4.9% YoY during Q1 2024, with the average new loan value also down, by 2.0%. Notably, the share of personal loan originations to subprime borrowers saw significant declines across the various lender segments: the share for traditional lenders dropped from 7% to 4%, money lenders decreased from 47% to 45%, and virtual banks fell from 13% to 8%. This trend highlights a growing reluctance to extend credit to higher-risk borrowers, which may impact overall market accessibility and New-to-Credit participation.

Virtual banks became increasingly dominant in revolving lines

Revolving lines was the only product to show significant YoY growth during Q2 2024. Inquiry volumes increased 19% YoY, with origination volumes climbing by 32.2% – although the average new account limits offered by lenders decreased substantially, by 40.7%. These trends indicate that lenders have continued to meet demand but did so with caution in the face of slightly higher delinquency risk and the continued growth in the number of consumers carrying balances (up 10.5% YoY). The impact of lower opening limits has resulted in a 17.2% decrease in average balances per consumer, bringing down total outstanding balances by 8.5%.

A noteworthy trend in Hong Kong is the increasing dominance of virtual banks in the revolving lines market, where they accounted for 69% of new account originations in Q1 2024, up from 49% in Q1 2023. This shift indicates that virtual banks are rapidly gaining market share from traditional banks and money lenders, likely due to their ability to offer more convenient and accessible services. As virtual banks continue to innovate and attract consumers, traditional lenders may need to reassess their strategies to remain competitive in the evolving landscape.

Delinquencies remain relatively stable with a growing need for enhanced early detection

Across all credit products, the consumer-level delinquency rate – measured as 60 or more days past due (DPD) on any account – slightly increased by two basis points (bps) YoY to 0.31%. The marginal deterioration in repayment performance was primarily observed in the unsecured personal loans and revolving lines portfolios. Specifically for personal loan, account-level 60+ DPD rates increased by 5 bps YoY to 0.86% in Q2 2024, and balance-level delinquencies were up 10 bps to 0.52%. In response to these increases, personal loan lenders have scaled back on new account originations over the past year.

To further evaluate the deterioration in repayment performance for personal loans, TransUnion conducted deeper analysis into vintage performance – comparing delinquency rates on accounts originated in different time periods at the same number of months on book. Analysis showed that recently originated loans within the near prime and subprime risk segments (representing 60% of active loan accounts) performed worse than earlier cohorts, at 12 months after origination. Among subprime consumers, 5.75% of accounts originated in Q2 2023 were over 60+ DPD after one year, compared to 4.95% for loans originated in Q2 2022. Among near prime consumers, 2.89% of accounts originated in Q2 2023 were over 60+ DPD, compared to 2.47% for loans originated in Q2 2022.

This aligned with the findings of TransUnion Hong Kong’s Q2 2024 Consumer Pulse Study, in which 20% of respondents said that they expected to be unable to pay any of their current loans or bills in full, up three percentage points from Q2 2023. This was particularly noteworthy among younger consumers, with 23% of Gen Z consumers indicating that they could not pay their current bills or loans in full. A decline in optimism about household finances is a further indication that small portion of Hong Kong consumers are struggling to meet their financial commitments: 44% of consumers were optimistic about their household finances over the next 12 months in the Q2 2024 survey, down from 62% who said the same thing in the same quarter in 2023.

“Deteriorations in payment performance, while modest, suggest a concern about repayment capabilities within certain risk segments, particularly in the current high interest rate environment,” said Sun. “Lenders should remain vigilant and consider implementing proactive measures to manage credit risk, such as monitoring consumer performance across all obligations and implementing early risk indicators. Enhancing financial literacy initiatives to support responsible credit use among consumers is also a positive step that could be taken, to ensure that all consumers, and particularly New-to-Credit borrowers, can navigate their financial obligations effectively.”

1 Economic situation in second quarter of 2024 and latest GDP and price forecasts for 2024 (with photo/video) (info.gov.hk)

2 30 June 2024 | Statistics on Passenger Traffic | Immigration Department (immd.gov.hk)

3 Originations are reported one quarter in arrears

4 Generations are defined as follows: Gen Z, born 1995–2004; Millennials, born 1980–1994; Gen X, born 1965–1979; and Baby Boomers, born 1944–1964

5 Economic situation in second quarter of 2024 and latest GDP and price forecasts for 2024 (with photo/video) (info.gov.hk)

6 TransUnion CreditVision® risk score: Subprime = JJ to II; Near prime = HH to DD; Prime = CC; Prime plus = BB; Super prime = AA

Consumer demand for new credit cards in Hong Kong remained subdued towards the end of 2023 with consumers holding sufficient cards in wallet to meet their needs. However, growing credit card balances show that they are using their existing cards more, with lenders extending additional capacity to borrowers during the first quarter of 2024. These are some of the findings of TransUnion (NYSE: TRU) Hong Kong’s latest Industry Insights Report, which provides lenders with insights into the current trends driving the local credit market.

Credit card enquiries – a measure of consumers applying for new cards – decreased by 8% year-over-year (YoY) in Q4 2023, and origination volumes decreased by 20% YoY over the same period. However, during Q1 2024, outstanding balances increased by 8.6%, and average balances increased by 7.5%, indicating that consumers are increasingly using their existing cards in the current environment. Enquiry and origination data are reported a quarter in arrears to account for the reporting lag on new accounts opened.

“Consumers continued to leverage their existing credit lines, building balances to meet their consumption needs during the first quarter of 2024, and extending value within those cards’ loyalty programmes rather than seeking to add new cards to their wallets,” said Weihan Sun, principal of research and consulting for Asia Pacific at TransUnion. “This presents lenders with the opportunity to leverage rewards programmes and other retention strategies to attain or retain the position of consumers’ top-of-wallet card, particularly at a time when consumers are using their cards more.”

Money lenders are becoming increasingly dominant in Hong Kong’s personal loan market

Personal loan originations decreased by 8.7% YoY during Q4 2023, despite higher demand for this product as evidenced by a 4.0% YoY increase in enquiry volumes. At the same time, the average new loan amount issued increased by 2.9% YoY as lenders shifted a larger share of new originations to lower risk borrowers, who typically receive larger loan amounts. For personal loans, originations by the highest risk subprime¹ borrowers tier fell 5.6%, while near prime grew by 4.8%. This shift in the borrower risk distribution on new loans might reflect a change in lender appetite as they focus on less risky segments due to a slight uptick in delinquencies for this product. Both account-level and consumer-level delinquencies (measured at 60 or more days past due) increased one basis point YoY in Q1 2024, though overall delinquency rates remain below the 1% level for both measures.

The report looked further at different segments of the personal loan market based on loan origination amounts: loans less than HK$150,000, loans between HK$150,000 and HK$300,000, loans exceeding HK$300,000. Each of these tiers displayed unique characteristics and are served by a different mix of lender types.

The lowest ticket value loan (less than HK$150,000) comprised 17% of active personal loans in Hong Kong in Q4 2023. At the same time, these smaller ticket loans represented 27% of recent originations and 25% of the consumer base holding personal loans – nearly two thirds (62%) of whom are Gen Z². This loan category was mostly serviced by money lenders, who issued 80% of loan originations for the lowest ticket range in the same quarter, while only a 10% share was held by traditional banks and 10% by virtual banks. Within the lowest ticket range, 59% of personal loans were granted to subprime borrowers.

The largest share of outstanding personal loans (67%) was in the mid-size ticket tier (HK$150,000 to HK$300,000), with that tier representing 48% of new originations and 54% of the consumer base holding personal loans – 61% of whom are Millennials. In line with money lenders’ business strategy of attracting customers in this generation, two thirds (66%) of new loans in this middle-size tier were granted by money lenders, with less than one third (27%) being granted by traditional banks and 7% by virtual banks. Of these mid-size ticket loans, 18% were granted to subprime borrowers, a much lower share than for the small-ticket loan tier.

Larger loans, in excess of HK$300,000, were mostly dominated by traditional banks, with 88% of all originations in this tier in Q4 2023, with 11% being issued by money lenders and just 1% by virtual banks. These larger-ticket loans represented 25% of all personal loan originations in Q4 2023, with smaller shares of the total active loan market (16%) and of the consumers holding personal loans (21%). Only 2% of large ticket loans were granted to subprime borrowers, in line with the heavy lender concentration in this segment by banks, which tend to focus on better risk consumers.

Money lenders have actively targeted lower amount loans, aligned to their business model, and have built significant brand loyalty, as evidenced by the number of repeat borrowers choosing their products growing over time, leading to them winning a greater share of the small and mid-size loan tiers.

Chart 1: Origination Share of Repeat Borrowers

“The personal loans space, in particular for small- and medium-ticket loans, is increasingly dominated by money lenders, which represents significant repeat borrowing opportunities as these smaller-ticket loans tend to have shorter durations and turn over relatively quickly,” said Sun. “Furthermore, personal loans remain a sizeable organic new-to-product opportunity, with one in four originations driven by new-to-product consumers – those who have never opened a personal loan previously – as they seek liquidity to meet their growing consumption needs. These needs can include making large purchases or funding home improvements, especially as lower interest rates on personal loans hold more appeal for consumers paying off purchases over time than credit cards, which generally carry much higher interest rates.”

According to TransUnion’s Q1 2024 Consumer Pulse survey, 38% of Gen Z borrowers and 32% of Millennials are planning to apply for new credit or to refinance existing credit over the next year. At the same time, 39% of Millennials who intend to seek credit said that they intend to apply for a new personal loan in the next year, a view shared by 26% of Gen Z survey respondents. This renewed confidence in credit indicates growth opportunities for lenders to build and maintain loyalty, and further expand their existing relationships with consumers who are shopping around for the best interest rates and rewards, and the quickest turnaround time on approvals.

Deteriorating vintages in revolving lines demand continued monitoring

Revolving line of credit, as a product, is more concentrated within near prime and subprime consumers than for other credit products like credit card and mortgage. While higher delinquency rates are expected for these riskier borrowers, the report reveals that recent vintages of new revolving line originations by these riskier borrowers are performing worse, indicating an adverse selection phenomenon.

Table 1: Performance of revolving line originations at 12 months on book

“More recent revolving line vintages for riskier borrowers have performed worse than pre-pandemic 2019 counterparts, likely because consumers are leveraging credit and balances have continued to build, potentially putting a strain on consumers’ wallets. However, we are seeing new lenders with different low-cost models entering the market who are more willing to cater to borrower risk segments that have previously been excluded, with the newer offerings accommodating a wider spectrum of consumers’ needs,” Sun said.

The revolving line landscape has shifted over the last few years, with virtual banks’ share of originations growing from 54% in Q4 2021 to 68% in Q4 of 2023. Over the same time, traditional banks’ share of these originations has declined from 11% to 4%, with money lenders having decreased from capturing more than one third (36%) of this market in 2021 to 27% in Q4 2023.

Chart 2: Origination distribution by lender type

“Lenders continue to seek new opportunities to engage with consumers in the market, which in turn has likely changed the borrower profile as more consumers in higher-risk credit tiers are now participating in products like revolving line,” he added. “Lenders need to be able to price for the additional risk at hand and monitor the early warning signs and indicators to enable greater predictability of delinquencies, and hence sustain smart growth for this product.”

While the risk distribution among virtual bank originations has remained relatively constant over the last two years, it has shifted significantly among traditional banks and money lenders. Above prime borrowers have migrated away from money lenders, seemingly moving to traditional banks instead, which can often offer better interest rates to lower risk borrowers. At the same time, traditional banks have maintained their low exposure to subprime borrowers seeking revolving lines to 1% over that time and reduced their exposure to near prime consumers (from 23% to 17% over the same period), indicating a lower risk appetite.

Chart 3: Risk distribution of revolving line originations by lender type

Consumers continue to leverage their existing credit, leading to greater balance growth with increased spend in retail and travel – retail alone saw increases of 0.9% in January and 1.9% in February, with private expenditure rising 1% YoY in the first quarter³.

“In this context of continued growth in Hong Kong, untapped opportunities remain for lenders to find sustainable growth within their existing portfolios, along with building loyalty that will attract repeat borrowing with the same lender,” said Sun.

¹ TransUnion CreditVision® risk score: Subprime = JJ to II; Near prime = HH to DD; Prime = CC; Prime plus = BB; Super prime = AA

² Generations are defined as follows: Gen Z, born 1995–2004; Millennials, born 1980–1994; Gen X, born 1965–1979; and Baby Boomers, born 1944–1964

³ news.gov.hk - Economy grows 2.7% in Q1

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

*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%.

Cardholders are continuing to leverage their credit cards at a time when Hong Kong’s economy is showing signs of revitalisation in a context of stabilised economic indicators and encouraging interventions by the government. Average consumer credit card utilisation increased across all risk tiers during Q3 2023, compared to the same quarter in 2022, leading to strong card balance growth. At the same time, the number of new-to-credit consumers in Hong Kong increased by 32% year-over-year (YoY), the most significant rebound since the pandemic, indicating solid growth momentum in consumer credit participation.

These insights are part of the Q3 2023 Industry Insights Report published by global information and insights company and Hong Kong’s leading credit reference agency, TransUnion’s (NYSE: TRU), providing lenders with insights into the latest trends that drive the credit market.

Cardholders leveraged their credit lines for rising spend demand

Although credit card origination volumes—a measure of new accounts opened—declined by 12.2% YoY, the average credit limit issued on new cards during Q2 2023 was 10.1% higher than in Q2 2022*, reflecting an increase in lender appetite to make credit available to meet rising spend patterns. This increase in consumer spending was also reflected across existing card accounts, as outstanding balances increased by 15.9% YoY in Q3 2023 and average balances per consumer increased by 14.0% YoY in Q3 2023, while the total credit limit on existing cards increased by 2.7% over the same period.

Average consumer credit card utilisation increased across all risk tiers[1] during Q3 2023 YoY, although the greatest increases were seen in the subprime (5.5 percentage points higher) and near prime (3.2 percentage points higher) risk tiers. Cardholders in the super prime segment were more conservative, increasing their utilisation by only half a percentage point.

This increased utilisation and higher card balances were likely driven by higher levels of retail spending. The value of retail sales increased in nominal terms by 13.7%[2] YoY in August 2023, while the value was provisionally estimated to have increased by 19.3%[3] YoY for the first eight months of 2023. This spending increase could have been encouraged by the Base Rate remaining stable since July 2023, along with inflation remaining at a low rate of 1.8%– 2.0% over the quarter[4].  

Other contributing factors to the increased card utilisation may be enhanced cash-back reward programmes offered by lenders seeking to capitalise on the retail resurgence. While those campaigns came to an end during Q3 2023, more are likely to follow during the upcoming festive season.

“The substantial card balance growth has been driven by increased spending capacity, well supported by limit increases on new and existing cards issued over the past quarter,” said Weihan Sun, Principal of Research and Consulting for Asia Pacific at TransUnion. “Lenders seeking further confident growth opportunities could consider the untapped potential of new-to-credit consumers, consisting of younger consumers coming of age and consumers who are new to the Hong Kong region, particularly as companies are increasing their efforts to attract international talent in a post-COVID-19 environment.”

Younger consumers entering the credit market have been a driver of the recent growth trends—TransUnion’s data shows that the share of new account originations from Gen Z consumers increased to 17.4% in Q2 2023 from 14.7% in Q2 2022. The fourth quarter has historically been the one in which Gen Z has consistently shown the greatest contribution to new card volumes over the last four years, highlighting that lenders could attract further growth by creating personalised offers that appeal particularly to this generation, along with a seamless onboarding experience, which is important to this segment.

Table 1: Summary of growth in unsecured lending products Q3 2023                 

^# Originations reported one quarter in arrears due to data lag and reflects Q2 2023 volumes. Growth reflects movement between Q2 2022 and Q2 2023 for year-over-year comparison.
 

Mortgage originations grew off the back of falling property prices    

After a long period of relative stasis, mortgage originations increased by 18.7% YoY in Q2 2023, with the Hong Kong House Price Index having consistently fallen each month since its 2023 high in March this year[5] – although property prices remain on average near highest levels in Asia.[6]

Looking forward, mortgage originations are likely to continue to grow significantly, following the 2023 Policy Address made by the Chief Executive, John Lee, on 25 October 2023, with measures to be introduced to address affordability concerns expressed by the market.

The halving of buyers’ stamp duty to 7.5% for non-permanent residents and for residents buying a second home, and the waiving of the 10% of home price stamp duty for owners who resell within two years of buying, are both likely to stimulate activity in this sector. The cutting of these costs provides more liquidity for consumers wanting to enter the property market, as they will have more capacity for a deposit or more money available to spend on home improvements once they purchase a home. Furthermore, it could also enable people to apply for mortgages more confidently, knowing that they will have additional capacity to service any debt obligations.

Additional stimulation is likely after the Capital Investment Entrant Scheme is launched to help attract investment to Hong Kong by facilitating entry for residence.

Revolving lines grew, unsecured loans declined

Revolving line originations continued to grow off the back of the resurgence in retail shopping and was supported by lender campaigns, particularly from virtual banks. Originations increased by 22.3% YoY in Q2 2023, although average new account balances decreased by 11.2% YoY over the same period. This decrease reflects caution from lenders as they assigned lower limits at origination, given that this product is most frequently taken out by higher risk consumers.  

Origination volumes of unsecured personal loans decreased by 6.8% YoY in Q2 2023, although the average new account balance increased by 10.6% YoY over the same period. As a result of these higher value new loans, outstanding balances increased by 5.0% in Q3 2023, and average balances per consumer increased by 4.8% in Q3 2023.

The market share of new personal loan accounts by lender type saw a shift, with banks originating 39.4% of new loans, a slight decrease from the same quarter previous year (40.2%), while moneylenders and virtual banks grew their market share, reflecting evolving strategies and consumer preferences. The distribution of outstanding balances across lender segments revealed that, despite having fewer accounts, bank-issued loans dominated the market with 72.2% of the total outstanding balances, down slightly from 73.7% in Q2 2022, underscoring banks’ significant role in the personal loan market and greater focus on lower risk borrowers who typically receive larger loan amounts. In contrast, non-bank money lenders and virtual banks contributed smaller, yet substantial, portions to the total balances –23.3% and 3.9%, respectively–both slightly higher than the same quarter, previous year.

“Growth in these products is primarily due to supply-side pricing and promotions over the past three quarters, and while many of these campaigns have run their course, consumers are more aware of the choices available to them and will likely continue to seek out offers that reward them meaningfully for their loyalty,” Sun said.

For more information about the TransUnion Hong Kong Industry Insights Report, register for our webinar on December 6, 3pm HKT by clicking here.

* Originations are viewed one quarter in arrears to account for reporting lag. 

[1] 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
[2] news.gov.hk - August retail sales up 13.7%
[3] Press Releases Detail (censtatd.gov.hk)
[4] Hong Kong Inflation Rate (tradingeconomics.com)
[5] Hong Kong House Price Index (tradingeconomics.com)
[6] Price per Square Meter/Square Foot in Hong Kong compared to Asia (globalpropertyguide.com)

Credit activity in Hong Kong continues to grow strongly, with originations across major products increasing by 32% year-over-year (YoY) for Q1 2023¹, led by extraordinary growth in credit card originations.

This is according to global information and insights company and Hong Kong’s leading credit reference agency TransUnion’s (NYSE: TRU) Q2 2023 Industry Insights Report, which provides lenders with insights into trends driving the credit market.

Credit card originations grew most significantly, by 45% YoY, with card originations among sub-prime² consumers growing by 391% - albeit off a low base. However, the average new card limits on these sub-prime originations are 30% lower than the average new card limit offered to consumers in this risk tier during the same quarter of 2022. The total credit limit for newly originated credit cards increased by 73% YoY during Q2 2023, with sub-prime limits having increased by 242% YoY.

Diagram 1: Credit Card Origination Growth – YoY

Source: TransUnion Hong Kong consumer credit database

These increases in originations are in a market that showed significant optimism in the context of a 2.7% GDP growth³ recorded in the first quarter of the year, subdued inflation at 1.9%⁴, and low unemployment at 2.9%⁵. Ascribing the surge in originations as local market optimism is supported by the findings of the TransUnion Hong Kong Q3 2023 Consumer Pulse Survey, in which 45% of respondents said that they were optimistic about their household finances for the next 12 months, and 35% saying that they are planning to apply for new credit or refinance existing credit within the next year. Despite the high interest rate environment, 58% said that current rates would have little or no impact on their decision on whether to apply for credit in the next year.

“Consumers are actively re-engaging with the newly re-opened economy, seeking out offers from lenders that include appealing benefits and lucrative loyalty programs,” said Marie Claire Lim Moore, Asia-Pacific regional president and Hong Kong CEO at TransUnion. “Lenders have invested heavily in promotions driving acquisition and spend, through a variety of mechanics, including reward currencies in return for choosing a particular airline or retailer.”

“Consumers are making the most of their renewed opportunities to transact with an increased confidence in Hong Kong’s economic growth – they’re travelling and shopping, and they’re actively seeking the most lucrative rewards and return on their spend while exercising their significant buying power. This is a reassuring sign for lenders and an opportunity to stay relevant and gain prominence to capture a growing share of spend amongst existing customers and prospects", she said.

Virtual banks leading market share of revolving line originations

In Q1 2023, revolving line originations grew by 15% YoY with new credit limits for this product growing at the same rate. The most significant growth in originations was observed (35%) among sub-prime consumers, who are expanding their wallet of credit products to take advantage of the additional liquidity and convenience that these products offer.

For the first time since their entry, virtual banks recorded 49% of all revolving line originations, making them the leading provider of this loan type. Virtual banks are particularly popular among younger borrowers, with these FinTech platforms designing their banking experience to be more engaging for this target segment.

Diagram: Revolving Line Origination by Lender Type

Source: TransUnion Hong Kong consumer credit database

Virtual banks are enjoying increased market share across risk tiers as they can offer almost all the banking services available at conventional banks, but via digital solutions that offer speed and convenience. They are supported by purpose-designed security mechanisms and are obliged by Hong Kong regulations to accept all interested clients without setting any minimum account balance⁷.

When asked whether they held any type of virtual banking products, 56% of respondents in the Q3 Consumer Pulse Survey said that they held a loan from a FinTech firm or digital bank.

“Competition is intensifying in the revolving line market. To stay competitive and capitalise on the growth in this market, lenders need to offer a friction-right verification and onboarding process for their customers, who expect fast, pleasant, and personalised experiences,” Lim Moore explained. “With two-thirds⁶ of respondents saying that they would switch brands for a better digital experience, FinTech platforms are well positioned to leverage consumer identity solutions that support smooth customer onboarding and retention, enabling trust between businesses and consumers.”

Demand for personal loans benefits from sustained growth

Personal loan originations grew by 5.2% YoY, with most demand in the prime and below risk tiers. Balances grew by 8% YoY and continue to stay at higher levels than pre-pandemic observations.

As seen with revolving lines, virtual banks are gaining share in this market, holding 9% of personal loan originations, compared to 7% in the same quarter in 2022. Banks’ share of this product type decreased from 44% of the market to 40% over the year, while money lenders’ share grew by three percentage points to 51%.

“Demand for personal loans continues to grow at a steady and sustained level despite the current high interest rate environment,” Lim Moore said. “Lenders are promoting attractive interest rates to stimulate demand for this product, which along with credit cards is one of the first products opened by consumers as they start their credit journey and build their risk profile.

“Even though inflation, high interest rates and other macroeconomic trends will continue to influence how consumers manage their finances for the rest of 2023, they are regaining confidence in the local economy and will likely seek out the most appealing offers from lenders as they re-engage with hospitality, retail, and travel in the coming months,” she added.”

For more information about the TransUnion Hong Kong Industry Insights Report, register for our webinar on September 19, 3pm HKT by clicking here.

¹ Originations are viewed one quarter in arrears to account for reporting lag.

²  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

³ Hong Kong: quarterly GDP growth 2023 | Statista.

⁴ Hong Kong Inflation Rate - July 2023 Data - 1981-2022 Historical - August Forecast (tradingeconomics.com)

⁵ Hong Kong Unemployment Rate - July 2023 Data - 1981-2022 Historical - August Forecast (tradingeconomics.com)

⁶ 2022 Global Digital Fraud Trends Report (transunion.com)

⁷ 8 Virtual Banks in Hong Kong: How Do They Compare? | Statrys

Credit activity in Hong Kong has grown significantly since the post-pandemic economic reopening, with originations¹ across major products increasing by 17% year-over-year (YoY) for Q4 2022 – the first positive growth in six quarters. This is according to global information and insights company TransUnion’s (NYSE: TRU) Q1 2023 Industry Insights Report, which provides lenders insights into trends in the local credit market that help them position for growth.

The most significant growth was among credit card originations, which increased by 28% YoY. The total credit limit at origination increased by 45% YoY, while outstanding balances grew by 18% compared to 7.3% in the previous quarter. Growth is likely to continue on a positive trajectory, based on a nearly 49% YoY growth in credit inquiries – consumers applying for new credit accounts – during Q1 2023.

Source: TransUnion Hong Kong consumer credit database
 

TThe most significant growth in card originations was among super prime² consumers, who account for 66% of Hong Kong’s credit-active population; card originations to super prime consumers were 30% higher compared to same quarter of 2021. Prime plus and prime consumers, who account for 24% of Hong Kong consumers, made up 34% of the overall originations and grew by 24% YoY in Q4 2022, reflecting the growth in demand and supply of new cards among lower-risk borrowers.

The report’s findings are in the context of significant real GDP growth of 2.7% YoY in the first quarter of 2023, with annual GDP growth for full year 2023 projected to be between 3.5% and 5.5%. GDP growth is likely to be near the higher end of the forecast range if the current momentum of recovery is sustained.³

Private consumption expenditure surged by 13% YoY in real terms in the first quarter, and overall investment expenditure reverted to 5.8% growth within the improved economic outlook.³ Consumers surveyed in the latest TransUnion Consumer Pulse Survey supported this sentiment, with 27% of respondents reporting increased discretionary spending. The survey also found more respondents added or expanded digital services, subscriptions and memberships (34% in the most recent survey, up from 19% in the previous edition).

“The credit card sector has turned around from its subdued performance in 2022 and the years before, with two consecutive quarters of significant year-over-year growth. Much of this growth was seen in the lowest risk borrower tiers, signaling a clear return to an upward trajectory for the market,” said Kevin Chen, principal, Financial Services Research and Consulting at TransUnion Asia Pacific.

“Consumers are making the most of their renewed opportunities to transact with an increased confidence in economic growth – they’re travelling and shopping, and they’re seeking the most lucrative rewards while exercising their spending power,” he said.

Younger consumers are the growth engine for the Hong Kong credit market

Originations among Gen Z consumers (born 1995 to 2010) in above-prime risk tiers grew by 27% YoY in Q4 2022, with originations among Millennial (born 1980 to 1994) above-prime consumers growing by 17%. These two generations accounted for the largest portion of growth among prime and below consumers as well, with 23% growth among Millennials and 22% growth among Gen Z consumers.

TransUnion’s recent study into the credit behavior of younger consumers showed that Gen Z consumers have the greatest appetite for credit as they mature into adulthood. In Hong Kong, there are around 500,000 adult Gen Z consumers aged 18 and older, with an additional 330,000 turning 18 and becoming eligible to apply for credit in the next six years⁴.

The study also found that Gen Z consumers were more like to hold credit from non-bank lenders, including money lenders and virtual banks, than Millennials were at the same age in 2016. The percentage of Gen Z (17%) holding non-bank credit cards was almost double that of Millennials (9%) at the same age. At the same time, 91% of Millennials held only cards issued by banks in their wallets in 2016, compared to 84% of Gen Z consumers who did the same in 2021.

“These are consumers who are growing up in a digital age; they are tech-savvy and willing to conduct most – if not all – of their transactions online,” Chen said.

Virtual banks enjoyed breakthrough popularity in the unsecured lending market in 2022

The personal loan landscape has changed significantly since the inception of virtual banks, with their FinTech solutions drawing market share from money lenders. In 2020, virtual banks accounted for 1% of personal loan originations, with their market share of originations growing to 7% in 2022. During this time, personal loan originations from traditional banks grew from 41% to 43%, while originations from money lenders fell from 59% of new personal loans to 50% over the two-year period.

Virtual banks are quite successful at acquiring younger consumers, with Gen Z borrowers responsible for 22% of virtual bank personal loan originations in 2022, up from 16% in 2021. Gen Z were responsible for 9% of traditional bank originations during 2022, and for 13% of originations with money lenders that year.

Virtual banks appear to be targeting younger consumers for unsecured revolving lines too, as 30% of originations of this product by virtual banks during 2022 were to Gen Z consumers. By comparison, just 5% of unsecured revolving line originations by traditional banks were to Gen Z during 2022. In contrast, 47% of unsecured revolving line originations for Gen X (born 1965 – 1979) were from traditional banks, while just 15% were from virtual banks during 2022.

From a zero base in 2020, the number of revolving lines originated through virtual banks reached nearly 120,000 in 2022, surpassing the volume originated by money lenders. Over that same time, the number of revolving lines originated by traditional banks fell from nearly 55,000 in 2020, to just over 31,000 in 2022.

“Virtual banking aligns with Hong Kong’s quick and slick culture, with virtual banks innovating the landscape with technological advancements to provide a new and simplified banking experience,” Chen said. “Their technology-enabled credit risk profiling means that they can make quick credit decisions, extending credit and other financial services to consumers, all via a device in the palm of their hand, wherever they may be and at any time.”

To compete in this changing environment, traditional lenders need to accelerate digitization to provide a friction-right customer lending experience, while preventing fraud. Digitization is not only a key to automation of processing to improve operational efficiency, but also important to deliver a relevant and convenient customer onboarding and lifecycle management experience.

”Strong growth in the card market in particular suggests that there are opportunities for lenders to meet consumers’ rising demand, with re-engaged consumers in the target risk segments indicating potential profitable growth, driven by the products and benefits that they value,” Chen concluded.

For more information about the TransUnion Hong Kong Industry Insights Report, please visit our dedicated website.

¹ Originations are viewed one quarter in arrears to account for reporting lag.
² 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.
³ Economic situation in the first quarter of 2023 and latest GDP and price forecasts for 2023 (with photo/video) (info.gov.hk)
⁴ Hong Kong Census and Statistics Department, Population by Age, 2021

Continued changes in Hong Kong consumers’ wallet profiles are being driven by macroeconomic pressures, including increasing inflation¹ and four interest rate hikes since the start of the year², according to TransUnion’s (NYSE: TRU) Q2 Industry Insights Report. The global information and insights company’s findings highlight a marked increase in the number of new unsecured personal loans and unsecured revolving credit lines, along with cautious spending on credit cards.

Unsecured personal loan originations increased by 6.7% year-over-year (YoY) in Q1 2022 (the latest period for originations due to reporting lag). Originations are a measure of new accounts opened and are a reflection of both consumer demand and lender appetite to advance credit. The total number of open unsecured personal loans increased by 5.2% YoY in Q2 2022, and over the same period the average balance for new personal loans also increased by 2.7%.

Originations of unsecured revolving lines increased by 81.3% YoY in Q1 2022 – this was in comparison to a relatively weaker quarter the year before for this category, and likely stimulated by the more favourable interest rates offered on this product type. The total number of revolving line accounts increased by 8.7% YoY in Q2 2022, although the average balance in this category fell by 9.1% YoY in the same period. This was primarily driven by increases in lending to consumers with prime and above credit scores³, with the share of originations to non-prime borrowers remaining steady. Low risk consumers tend to carry lower balances on revolving products, which may explain some of the decrease in overall average balances despite the increase in originations. At the same time, lenders are granting smaller credit limit amounts on new unsecured revolving line accounts to prime and above consumers—approximately half the average new credit limit compared to new limits assigned 12 months ago.

Countering the growth in new account openings for unsecured credit loan and line products, the number of credit card accounts in the Hong Kong market fell by 3.4% YoY. This was primarily caused by a 38.2% YoY decline in origination volumes in Q1 2022. Additionally, the average new credit card account credit line fell by 8.0% YoY in Q2 2022. Outstanding balances remained broadly static for credit cards as consumers took a cautious approach to spending. Consumers continued to perform well on their card payment obligations, with balance-level delinquencies for credit cards falling by two basis points (bps) YoY in Q2 2022.

The fall in the number of credit card accounts and in originations is likely due to a saturation of accounts in market, with most Hong Kong residents, on average, already holding more than two cards in pocket⁴. Government issuance of consumer vouchers via digital channels, and a lack of attractive promotions or favorable interest rates has made Hong Kong residents reluctant to apply for new credit cards.

The trends identified by the Q2 Industry Insights Report are also supported by the findings of the Q2 TransUnion Hong Kong Consumer Pulse Study, published in August. It reflected consumers’ cautious approach to spending, with 95% of consumers saying they were concerned about the current rate of inflation in Hong Kong. The study also found that 22% of consumers expect to be unable to pay at least one of their current bills or loans in full in the coming months, with 81% of respondents having said that their household income stayed the same or decreased in the preceding three months. This is despite the recent drop in the Hong Kong unemployment rate, which has improved each month since April 2022 but still remains above pre-pandemic levels.⁵

The same study highlighted that 45% of Hong Kong residents were cutting back on discretionary spending, including dining out, travel, and entertainment, with 16% cancelling subscriptions and memberships and 12% cancelling or reducing digital services.

Table 1: Q2 Metrics for Major Consumer Credit Products in Hong Kong

Source: TransUnion Hong Kong (except for mortgage data which is from the Residential Mortgage Survey (June 2022) published by the Hong Kong Monetary Authority)

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 a balance level except for mortgages and loan on card, which are reported at an account level.

Shift in saving and investment strategies

“The significant growth in unsecured loans and revolving lines indicates a clear shift in consumer preferences and needs in light of the rising cost of living. This shift has likely led to the unusually cautious spending behaviour that has mostly impacted the credit card market,” says Marie Claire Lim Moore, Regional President, Asia Pacific and Hong Kong CEO of TransUnion. “With strong macroeconomic headwinds impacting the market, consumers are understandably cautious about credit usage.

The Q2 TransUnion Hong Kong Consumer Pulse Study findings support this with consumers starting to focus more on savings rather than on spending and investments – the number of Hong Kong residents saving more in their emergency fund increased by four percentage points, to 45% from Q1 to Q2 2022.

“Consumer sentiment during the second quarter may also have been impacted by the fifth wave of COVID-19 and associated inbound travel restrictions,” Lim Moore says. “It will be important to see how the market responds to the relaxation of travel restrictions and quarantine rules with the introduction of the ‘3+4’ approach to COVID-19 during August 2022,” adds Lim Moore⁶.

Secured lending reflects cautious sentiment

Secured lending trends often reflect consumers’ long-term sentiment, given the length and amount of commitment implied by a mortgage or auto loan agreement. Overall growth among secured products like mortgages and auto loans has slowed down compared to growth rate peaks earlier in the pandemic.

YoY originations growth for mortgages, although still positive, was 1.1% in Q1 2022 and was well below YoY growth levels recorded at the end of last year (Q4 2021 YoY change: 19.2% and Q3 2021: 25.1%). The total number of auto loan accounts decreased by 10.2% YoY in Q2 2022, with a 25.8% YoY fall in origination volumes in Q1 2022. The slowdown in secured credit products is an indication of a caution in consumer sentiment towards taking on major financial commitments during times of uncertainty.

“As we navigate challenging economic conditions, it is important for lenders to look for resilient consumer segments by assessing the credit needs and preferences of their existing customers,” says Lim Moore. “In light of the rising cost of living, there are segments of consumers who may need to leverage credit to cope with economic pressures. By leveraging enhanced insights that help predict consumer credit needs and behaviours, lenders can serve these consumers effectively to drive portfolio growth in the near future,” concludes Lim Moore.

For more information about the Q2 2022 Hong Kong Industry Insights Report and to register for the webinar scheduled for 28 September at 3:00pm HKT, please click here.

1 Hong Kong Inflation Rate - July 2022 Data - 1981-2021 Historical - August Forecast (tradingeconomics.com)

2 Hong Kong Interest Rate - 2022 Data - 1998-2021 Historical - 2023 Forecast - Calendar (tradingeconomics.com)

3 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

4 Total number of credit card in market divided by total population comes to 2.6 credit cards per person

5 Hong Kong Unemployment Rate - July 2022 Data - 1981-2021 Historical - August Forecast (tradingeconomics.com)

6 Arrivals in Hong Kong now only have to isolate in a hotel room for three days, instead of seven. This is followed by four days of medical surveillance, including rapid antigen and polymerase chain reaction testing, and limited public activity. Arrivals must also comply with restrictions under the amber code system.  Explainer: Hong Kong's '3+4' Covid-19 hotel quarantine arrangements for international arrivals - Hong Kong Free Press HKFP (hongkongfp.com)

The newly released TransUnion (NYSE: TRU) Q3 2021 Industry Insights Report shows increased momentum in the Hong Kong consumer credit market. Against a backdrop of continued economic growth¹, increased consumer spending² and falling unemployment³, consumer and lender confidence appear to be improving and led to a significant increase in new accounts opened (originations).

During a period when COVID-19 infection rates remained low and international travel continued to be restricted, originations—a measure of new accounts opened that is a function of both credit demand and supply—increased across all the major unsecured lending categories. Year-on-year (YoY) growth was most pronounced for unsecured revolving lines at 46.7%. Although this was from a low base, having recorded a significant decline during pandemic times, it was the second consecutive quarter in which growth was observed in this category. This category had previously recorded five consecutive quarters of YoY declines (Q4 2019 to Q4 2020, inclusive).

Credit cards—the most widely held consumer credit product in Hong Kong—maintained the strong YoY growth seen earlier in the year, as originations increased by 24.5% YoY in Q2 2021 (most recent quarter for originations because of reporting lag). The other major unsecured lending categories of personal loans (up 32.2%) and loan on card (up 30.4%) also showed significant increases.

This momentum is expected to continue in the coming quarter, with Q3 enquiries—a measure of consumer demand—showing a similar growth trend. As with originations, unsecured revolving lines recorded the largest increase in enquiries – up 97.8% YoY in Q3 2021, reaching a two-year high. Credit card enquiry volumes increased 14.8% YoY in Q3 2021, compared to a YoY decline of -28.8% in Q3 2020. Personal loan enquiries increased 11.3% YoY in the latest quarter.

The resurgence in originations is congruent with wider TransUnion research, with its recent Q3 Consumer Pulse research⁴ showing a general improvement in household finances. The research showed the number of consumers reporting their household income was negatively impacted by the pandemic was down 12 percentage points from Q1 (Q1: 55%, Q3: 43%). It also showed that the number of households intending to increase spending had increased – nearly a third (Q3: 31%) said they expect to spend more on retail purchases, up six percentage points compared to the prior quarter (Q2: 25%).

Outstanding balance growth across credit cards, loan on card and unsecured revolving lines generally follows originations growth as consumers start to draw down on the credit facilities newly available to them over time. It is anticipated the recent growth in originations will have a corresponding increase in balances in coming quarters. Credit cards was the only unsecured lending category to record an increase in balances YoY in Q3 2021 (up 4.3%), having already seen positive originations growth earlier in the year.

“With unemployment in Hong Kong now at its lowest level since the pandemic begun, and a resurgence in retail spending supported by the consumption vouchers issued in recent months, the growth in new accounts opened has been significant and continues to reverse the impacts of the pandemic,” said Marie Claire Lim Moore, CEO, Hong Kong, TransUnion. “Sustaining this recovery will be front of mind for policymakers and lenders alike, and ensuring the insights needed are available to support Hong Kong will remain our focus. At the moment, we are very much at the centre of a consumer, and increasingly borrowing-led, recovery, and we are working closely with lenders to help maintain this momentum.”

Table 1: Q3 2021 Metrics for Major Consumer Credit Products in Hong Kong

Source: TransUnion Hong Kong (except for mortgage balance data which is from the Residential Mortgage Survey (September 2021) published by the Hong Kong Monetary Authority)

i. When considering enquiries, loan on card is a subset of credit card (i.e. you must have a credit card to have a loan on card) – as such, this product does not require enquiries for originations.

ii. Originations are viewed one quarter in arrears to account for reporting lag.

iii. 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.

iv. Delinquency data are reported at a balance level except for mortgages, which are reported at an account level.

Lenders show an increased risk appetite, with money lenders leading the charge

The growth in new accounts opened has been observed across all risk tiers, but was most concentrated in the prime and below risk tiers⁵.

For credit cards, originations from prime and below risk tiers (which constitutes about a fifth of total origination volumes) increased by 31.1% YoY in Q2 2021. At an industry level, average new account credit lines for credit cards increased 20.4% YoY in Q3 2021.

A similar trend was also seen for personal loans, with originations for below prime consumers increasing by 36.2% in Q2 2021, compared to 21.7% for the prime and above risk category.

Mortgages—Hong Kong’s primary secured lending category—continued to be more focused on low-risk consumers (93.3% of originations are for prime and above consumers), which is consistent with historical trends.

The increased participation by higher risk (below prime) tiers in the unsecured lending categories, was reflected in both money lender and traditional banks’ origination risk dynamics. When measuring originations growth for unsecured personal loans, for banks the share of originations for below prime consumers increased to 55% in Q2 2021, up from 23% in Q2 2020. For money lenders—who have a business model traditionally more focused on higher risk lending—this increase was to 94% from 75% over the same periods.

For revolving line balances, money lenders have also gained market share. Although overall outstanding balances declined -3.6% YoY in Q3 2021, money lenders’ total share of balances increased to 28% in Q3 2021, up from 18% in Q3 2019.

The increased presence of online lenders in the Hong Kong market, especially within the below prime lending tiers, corresponds with a general increase in the awareness of FinTech lenders amongst consumers. TransUnion’s latest Consumer Pulse research showed that almost two-thirds (62%) of consumers were aware of emerging ‘buy now, pay later’ online services, and just over a third (35%) said they had used these services one or more times in the last 12-months.

“Competition for acquisition growth is increasing. Emboldened by consistently low levels of delinquencies which have continued to improve in recent quarters, lenders of all types have increased their risk appetite and have been able to service the needs of resilient Hong Kong consumers. Careful portfolio monitoring and continued adjustments to underwriting parameters are key to remaining competitive in an improving consumer credit market,” Lim Moore concluded. “With the pandemic recovery under way, competition for share of wallet and retaining new customer loyalty are key elements to lender success. By employing insight-led strategies, lenders can continue to meet the needs of consumers that are entering or re-engaging in the consumer credit market in significant numbers.”

For more information about the TransUnion Hong Kong Industry Insights Report and to register for TransUnion's Q3 2021 Industry Insights Report webinar scheduled for 15, December at 3:00pm HKT, please visit our dedicated website page.

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. Retail spending increased by 7.3% year-on-year in September 2021 (source: Census and Statistics Department)

3. Unemployment rate dropped to 4.5% in the three months to end of September 2021 (source: Census and Statistics Department)

4. Results of TransUnion Consumer Pulse Study of 1,100 Hong Kong adults conducted August 16-31, 2021

5. 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.

• Consumer sentiment remains positive despite rising global trade tensions and expected pull back in GDP in H2 2018

• YoY card balance growth in Q2 2018 exceeded inflation driven by increased new card originations (grew 20% YoY in the first quarter) and increased utilization of existing cards:

• Younger consumers continue to be the engine for strong consumer credit growth

  • Millennials hold 26% of total card balances

  • Three out of 10 credit cards added in the last 12 months were opened by Gen Z and their balances have almost doubled on the back of this, ending the quarter with around 85% YoY growth

• Unsecured personal loan market shows weaker growth with number of accounts falling 2.1% and number of consumers with personal loans dropping 2.2% YoY

• Mortgage inquiry volumes reached their highest levels in three years despite rising house prices and interest rates

Hong Kong, Sep 5, 2018 – The Hong Kong consumer credit market continues to benefit from favourable economic conditions, including low unemployment, high labour force participation and rising wages. TransUnion’s (NYSE: TRU) newly released Q2 2018 Industry Insights Report showed positive originations and balance growth across most major consumer lending products, with generally low and stable delinquency rates, as consumers are continuing to access credit and are able to successfully manage current debt levels.

“Hong Kong’s consumer lending environment continues to reflect the strong economy with widespread balance growth,” said Brendan le Grange, director of research and consulting for TransUnion Hong Kong. “Escalating global trade tensions might pull back GDP growth in the second half of the year, which remains an area of potential concern for lenders and consumer businesses. But through the first half of the year, there are no indications of significant risk within the consumer lending sector.”

Credit cards – the most widely held credit product in Hong Kong – are leading the rise in overall consumer balance growth. Q2 2018 is now the third consecutive quarter in which year-over-year card balance growth has exceeded inflation. This balance growth has been driven by both new card originations and increased utilization of existing cards. Credit card account originations in the first quarter of 2018 (latest data available) were up nearly 20% year-over-year, to 587.1K, compared to Q1 2017 (latest data available). Average consumer balances at the end of Q2 2018 increased 2.9% over the prior year, to 39.0K. At the same time, card delinquencies remained well controlled. Consumer-level delinquency rates–the percentage of consumers 90 or more days past due on one or more cards–dropped one basis point over the past year to 0.07% at the end of Q2 2018.

Younger -consumers were once again the engine for that growth. While Baby Boomers (born 1946 to 1964) reduced their balances by 3.9% year-over-year, Millennials (born 1980 to 1994) accounted for two out of every three HK dollars added by the credit card industry in the last year (Q2 2017 to Q2 2018). They now hold 25.8% of total card balances.

The youngest borrowers grew their balances even faster, as three out of 10 credit cards added in the last 12 months were added by Generation Z (born 1995 onwards). Gen Z balances have almost doubled on the back of this, ending this quarter up 84.7% year-over-year.

“As we’ve seen in recent quarters, the youngest generations are driving growth in the consumer credit market. Many of these consumers are still early in their careers and still entering household formation life stages, and their credit needs are continuing to evolve and grow. This bodes well for the overall Hong Kong market today and in the future,” said le Grange.

Potential Weakness Seen in Unsecured Personal Loan Market?

While the consumer credit market is performing well overall, TransUnion noted weaker growth in the unsecured personal loan market. TransUnion found that the number of open accounts fell 2.1% over the past year, to 618.9K in Q2 2018, while the number of consumers with a personal loan dropped 2.2% over the same period to 422.1K.

“Unsecured personal loans are an important segment of the consumer credit market because younger consumers often utilize such loans,” said le Grange. “It is not yet clear whether consumers are shifting their borrowing preferences to other account types, such as credit cards, or if lenders are pulling back from marketing this product. This trend bears watching in the coming quarters to understand if there is a longer-term shift occurring, and how lenders may be able to respond.”

 Mortgage Market on the Rise

TransUnion’s Industry Insights Report also found that the mortgage market is performing exceptionally well. Mortgage inquiry volumes reached their highest levels in three years, despite both higher house prices and rising interest rates.

“Hong Kong property prices continue to rise, with the Centa-City Leading Index, an indicator of Hong Kong property price changes, adding approximately 17% year-over-year. This is compounded by mortgage lending rates that have started to climb, which may put pressure on demand for new home purchases. Despite these headwinds, the number of mortgage inquiries in Q2 2018 reached the highest levels in over three years,” said le Grange. “This strong demand contributed to the healthy growth in mortgage accounts we saw over the past year.”

As of Q2 2018, there were 532K mortgage accounts, up 7.6% from Q2 2017. As well, mortgage account originations increased year-over-year by 0.7%, to 26.5K in Q1 2018, the latest quarter available. At the same time, account-level delinquency rates (60 or more DPD) dropped 1 basis point to a low 0.04%.

“The mortgage market’s strong performance is indicative of the overall consumer performance in Hong Kong. More credit is being extended, balances are rising and delinquencies are, for the most part, dropping. This is good news for both lenders and consumers,” concluded le Grange.

About TransUnion (NYSE: TRU)

Information is a powerful thing. At TransUnion, we realize that. We are dedicated to finding innovative ways information can be used to help individuals make better and smarter decisions. We help uncover unique stories, trends and insights behind each data point, using historical information as well as alternative data sources. This allows a variety of markets and businesses to better manage risk and consumers to better manage their credit, personal information and identity. Today, TransUnion has a global presence in more than 30 countries and a leading presence in several international markets across North America, Africa, Latin America and Asia. Through the power of information, TransUnion is working to build stronger economies and families and safer communities worldwide.

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