Gen Z consumers, travel spending boost credit market growth in Q2 2024 

GDP and export growth also supported the stable credit market in Q2 2024.

Consumer balances on existing credit facilities increased during Q2 2024 as consumers used credit to fund summer travel and offshore spending, TransUnion reported.

The 3.3% GDP growth and the 7.5% year-on-year (YoY) growth in exports also contributed to the stable credit market in Q2 2024.

On the flip side, the credit market saw mixed trends in the quarter, with a 5% YoY drop in inquiries, reflecting lower demand for new cards.

Lenders were also cautious during the period, with the average credit limit extended on new cards to consumers falling by 7.8% YoY. Meanwhile, outstanding balances on credit cards increased by 7% YoY, with average balances per consumer increasing by 4.9%.

In addition, TransUnion said that the number of consumers carrying a balance grew by 2% YoY, likely driven by the continued influx of new Gen Z cardholders.

However, despite a 0.7% YoY rise in outstanding balances in Q2 2024, the average balance per consumer fell 2.1%. The number of consumers carrying a balance grew 2.9%, but their average balance was lower.

For virtual banks, revolving lines were the only product to show significant YoY growth during the period. Inquiry volumes rose 19% YoY, whilst origination volumes climbed 32.2%. However, the average new account limits offered by lenders dropped significantly, by 40.7%.

The lower opening limits led to a 17.2% drop in average balances per consumer, reducing total outstanding balances by 8.5%.

Across all credit products, the consumer-level delinquency rate of 60 or more days past due (DPD) rose slightly by 2 bps YoY to 0.31%.

For personal loans, 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 Q1 2024, personal loan originations fell across lender segments, with traditional lenders dropping from 7% to 4%, money lenders from 47% to 45%, and virtual banks from 13% to 8%, reflecting reduced credit access for higher-risk borrowers and potential impacts on market accessibility and New-to-Credit participation. 

TransUnion’s Q2 2024 Consumer Pulse Study also found that 20% of respondents, of which 23% are Gen Z consumers, expect to be unable to pay current loans or bills in full, up 3 percentage points YoY.

‘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,” Weihan Sun, Principal of Research and Consulting for Asia Pacific at TransUnion said.