TransUnion Study Reveals Hong Kong Consumers are Cautious in Financial Management Amid Evolving Economic Conditions
- Only 29% percent of Hong Kong consumers reported increases in household income in last three months – a year-over-year drop from Q2 2023
- Inflation of everyday goods is the top concern affecting household finances in the next six months
- At least one in three consumers expects further decreases in discretionary spending to better manage their finances
Global information and insights company and Hong Kong’s leading credit reference agency, TransUnion (NYSE: TRU), today released its Consumer Pulse Study for Q2 2024 which shows that less than one-third (29%) of surveyed Hong Kong consumers said that they had had increases in household income in the previous three months. This was a notable 13 percentage point year-on-year (YoY) decrease from 42% in the same quarter last year. While this decline in income may be of concern for stakeholders, the study also finds that consumers were more proactive in their personal finance management in the face of greater economic uncertainties.
Cuts to discretionary spending as consumer optimism cools
In Q2 2024, less than half (44%) of the surveyed consumers said that they were optimistic about their household finances over the next 12 months, down from 62% in the same quarter last year. Additionally, 20% of respondents indicated they expected to be unable to pay any of their current bills and loans in full, up three percentage points from Q2 2023. Younger cohorts appeared to be more vulnerable with 23% of Gen Z1 consumers reporting that they could not pay their bills and loans in full.
Looking into the top concerns affecting household finances in the next six months, 60% of consumers said that they were worried about the inflation of everyday goods (groceries, gas, etc.), followed by 57% who reported being concerned about a possible recession, and 53% said that they were uneasy about job security.
“The decline in optimism about household finances is a concerning trend. The latest data from TransUnion’s Consumer Pulse Study reveals that consumer sentiment is cooling. The vulnerabilities of Gen Z in managing their debt is a wake-up call for borrowers and lenders, and it shows a clear need to improve financial literacy among younger generations,” said Weihan Sun, Principal of Research and Consulting for Asia Pacific at TransUnion.
With these potential economic challenges in mind, consumers are taking a more cautious approach to their financial management. Looking ahead, 41% of consumers expected large purchases for appliances and cars to drop over the next three months. Furthermore, at least one in three (37%) expected further decreases in discretionary spending, and 36% expected a drop in online and in-store retail purchases. These insights suggest that consumers are adapting their spending to weather anticipated economic turbulence.
Stronger appetite for new credit from Gen Z and consumers with moderate risk
In times of economic uncertainty, access to credit and lending products helps provide financial stability for many consumers. Across all generations, more than two-thirds still believed access to these financial tools is at least moderately important. Looking at new credit, 30% of consumers expressed interest in applying for new credit or refinancing existing credit over the coming year. Gen Z consumers (36%) showed stronger interest followed by Millennials (35%), Gen X (28%) and Baby Boomers (17%). Among those planning for new credit activities, 49% intended to apply for a new credit card, 30% a new personal loan, and 28% a limit increase on an existing card.
The study also found a considerable increase in demand from moderate risk2 consumers compared to the same quarter last year. While self-reported super prime consumers planning to apply for new credit dropped five percentage points from last quarter to 29%, prime (59%) and near prime (50%) consumers with plans for new credit recorded a significant YoY increase, up 27 and 14 percentage points respectively from Q2 2023.
The number of self-reported subprime consumers who said that they would be interested in new credit or refinancing existing credit dropped considerably YoY from 70% to 55%. Considering the 35% increase in bankruptcy petitions recorded by the Official Receiver's Office in May this year from a year ago3, financial institutions should still carefully evaluate subprime consumers’ appetite for new credit.
Though considering new credit, more than a quarter (28%) of surveyed consumers had abandoned plans to apply for new credit this quarter. The primary reason for this decision was the high costs associated with new credit and refinancing activities (32%), followed by burdensome application processes (27%).
Growing awareness of digital fraud attempts
With an increasing range of channels and services to support digital payments, online transactions have become a significant part of consumer behavior in Hong Kong. In Q2 2024, 50% of consumers indicated that they conduct at least a quarter of all their transactions online, with one in six (16%) even conducting more than 50% of their transactions online. Alongside the growth of digital payments is a corresponding increase in consumer awareness of fraud.
In the last three months, fewer consumers (56%) were unaware of any fraud schemes targeted at them, compared to 60% in the same quarter last year. Meanwhile, 38% reported being targeted by fraud but did not fall victim, which is a five-percentage point increase from 2023. All these indicate a growing awareness towards digital fraud attempts among consumers.
With rising consumer awareness, concerns about sharing personal information have also increased. Nearly seven in ten (68%) of Hong Kong consumers expressed concern about this, up from 61% in the same quarter last year. The primary reasons for concern included the fear of identity theft (72%), personal invasion of privacy (58%), and receiving unsolicited marketing communications (47%).
“Consumers are becoming more cautious about how their personal information is handled and shared, demanding greater transparency and security from businesses to keep them away from risks associated with data breaches and identity theft. Businesses need to address consumers’ concerns by introducing robust data protection measures and clear business communications. These are crucial to build consumer trust and encourage more responsible data-sharing practices,” added Sun.
TransUnion’s Consumer Pulse Study surveyed 853 consumers in Hong Kong between 1–13 May, 2024. This quarterly study examines shifting consumer attitudes and behaviours based on the dynamics of income, debt, and identity theft. For more information, please view the full report of the Consumer Pulse Study Q2 2024.
