TransUnion said the latest results from its quarterly Consumer Pulse Survey, which tracks Hong Kong consumer attitudes to their financial situation and outlook, shows a further decrease in the impact of the pandemic on household incomes with 43% of consumers reporting their household income was negatively impacted, down 2 percentage points from the previous round of the study conducted in June.
Meanwhile, more consumers are expecting to spend more in-store and online. Just under a third (31%) expect to spend more on retail purchases which is a six percentage points increase over the previous quarter. This increased expectation has occurred at a time when the government was rolling out its first batch of consumption vouchers.
The survey also revealed that Buy Now Pay Later (BNPL) and Payday Loans are gaining popularity as the economic situation rebounds.
The latest Q3 Consumer Pulse Survey polled 1,100 Hong Kong consumers between 16-31 August 2021.
Consumer sentiment continues to improve but uncertainty remains over the survey period, Hong Kong maintained a near-zero level of locally transmitted Covid-19 cases. This backdrop supported a continued improvement in consumer sentiment. More than half of consumers (57%) said their household income was currently unaffected. The majority were also more confident in their ability to pay their financial obligations – 76% expected to be able to pay their current bills and loans in full, up four percentage points from the previous survey in June.
The Consumer Pulse Survey also found that across all categories of bills and loans there was a decrease in those unable to meet their obligations compared to the last quarter. Among these, 26% felt they would be unable to pay their personal loans (down 10 percentage points). This was followed by payment concerns on private student loans (down nine percentage points to 25%) and mortgages and auto leases (down eight and 15 percentage points to 15% respectively).
More consumers increased their discretionary spending over the quarter (up two percentage points to 22%) and expanded digital services (up three percentage points to 18%). Fewer consumers cancelled subscription/memberships (down two percentage points to 19%) and reduced digital services (down two percentage points to 16%). Perhaps in anticipation of receiving government spending vouchers, 80% of consumers expected at least to maintain or increase their online transactions over the next three months.
While the survey results demonstrate improving consumer sentiment, concern remains regarding the future impact of the pandemic. Looking ahead, nearly half (48%) of respondents expect their income to decrease. Considering the uncertainty, over the last three months, 52% of consumers have cut back on discretionary spending, while the number saving to build their emergency funds is up five percentage points to 44%. The number saving for retirement also increased (up five percentage points to 23%).
Credit market recovering with credit demand and supply increasing
The Consumer Pulse Survey also showed an improvement in financial inclusion in Hong Kong. In this round of the survey, 38% of consumers believed they had sufficient access to credit and lending products, an eight percentage points increase over the previous quarter.
Half (50%) of all respondents said they find access to credit important in achieving their financial goals, three percentage points more than the previous quarter. Just over two in five (41%) of respondents planned to apply for new credit or refinance existing credit.
When calculating credit need by risk segments, near prime consumers said they had the most need for credit (67%), followed by prime plus (66%) and prime (59%). Almost three-quarters (73%) of consumers found it either very or extremely important to monitor credit, up six percentage points from Q2 and 14 percentage points from Q1.
“The latest survey indicates a narrower gap between consumer needs and market supply. We also see that more consumers understand the importance of maintaining credit health in order to access needed credit to achieve their financial goals,” said Marie Claire Lim Moore, CEO of TransUnion Hong Kong.
“This finding is in line with our latest Industry Insight Report, which also showed increasing credit demand and supply. This brings opportunities to both credit suppliers to capture growth, and for Hong Kong consumers as the economy continues to recover from the pandemic.”
In the context of the overall improved market environment, the survey also found two new credit products – Buy Now Pay Later (BNPL) and Payday Loans – were gaining popularity. Almost two- thirds (62%) of respondents were aware of BNPL services, up 14 percentage points from the last survey. But more consumer education is required as 27% of consumers who had not used BNPL said they did not understand the service.
The Payday Loan is a new credit product brought to market by virtual banks which helps bridge gaps between spending need and actual payday. 80% of respondents had heard about it and just over half (52%) believed the product would be at least somewhat valuable.
With the product still being new to the market, only 10% of consumers had used the service in the past 12 months. “These products showcase how virtual banks are trying to gain more market penetration, introducing alternative credit lines for different types of consumers,” said Lim Moore. “This is also a reflection of a more competitive market, requiring banks and lenders to better understand their customers and be more prepared for their evolving needs.”
TransUnion’s research and credit education tools are being updated regularly on its Covid-19 website as the company continues to support consumers and businesses around the globe.