Millennials and Gen Z drive 76% surge in Hong Kong's revolving credit

Millennials accounted for 40% of new revolving credit users, whilst Gen Z’s participation more than doubled (+127.8% YoY).

Younger consumers in Hong Kong are reshaping the lending landscape, driving a 76.4% YoY surge in revolving line originations, with digital banks leading the expansion.

A new TransUnion report revealed that Millennials accounted for 40% of new revolving credit users, whilst Gen Z’s participation more than doubled (+127.8% YoY) in the three months ending November 2024.

The rise in digital banking has fuelled demand for revolving credit lines, with 66% of new originations coming from digital banks.

These institutions attract young borrowers with faster approvals and lower credit limits, though the average new account credit line has dropped 32.8% YoY due to lenders’ cautious risk strategies.

Despite a 5.1% decline in outstanding balances, the number of revolving line accounts has grown by 6.2% YoY, reflecting steady consumer demand.

Whilst revolving credit lines are expanding, personal loan originations declined by 4.6% YoY, signalling a more cautious lending environment. Gen Z, however, bucked the trend, with personal loan originations rising 10.3% YoY.

Lenders have tightened risk management, leading to a 1.3% drop in outstanding balances and a 1.2% decline in total accounts. Whilst risk-averse lending strategies have improved delinquencies, delinquency rates on revolving credit (60+ days past due) still increased to 0.7%, reflecting growing balances among younger consumers.

Despite credit card originations dropping 9.1% YoY, existing cardholders increased spending, leading to a 1.4% rise in outstanding balances by November 2024.

Gen Z consumers accounted for 21.4% of new credit card issuances, up from 17.4% YoY, as they started building their credit profiles.

Lenders are also eyeing new-to-Hong Kong consumers as a key growth segment. With 180,000 new talents moving to Hong Kong in 2024 under various admission schemes, banks see an opportunity to tap into lower-risk, high-earning borrowers, particularly in the finance and technology sectors.

As young professionals enter stable, well-paying careers, lenders have an opportunity to expand their credit portfolios by targeting low-risk, high-growth borrowers.

Analysts suggest that data-driven lending strategies will be crucial in identifying creditworthy applicants whilst managing potential delinquency risks.