Gen Z Consumers Start to Shape Indian Credit Market as They Become Increasingly Credit Active

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·         Nearly 9 million Gen Z Indian consumers now credit active

·         Two-wheeler loans are the most popular credit product among Gen Z, followed by consumption products such as consumer durables and credit cards

·         Credit-active Gen Z consumers more likely to be in near prime and prime risk bands than wider population

Mumbai, February 5, 2020 – Newly released research by TransUnion shows that India’s Generation Z consumers-those born in or after 1995-are becoming increasingly credit-active and are helping fuel the growth of the consumer credit market.

The TransUnion study explored the credit activity of Generation Z consumers (also known as Gen Z) in emerging credit markets including India, Colombia and South Africa, as well as established consumer credit markets including Canada, Hong Kong and the United States. The study explored the depersonalized credit data of Gen Z consumers globally as of CY 2019 to understand their credit behaviors by country, specifically observing originations, account preferences and balances.

The percentage of the Indian population that was classed as Gen Z, ranging from age 0-24 as of CY 2019, was 44%, representing more than 609 million people. The percentage of the population that was Gen Z and over 18, and thus eligible to apply for credit, was 11%, almost 147 million people. The TransUnion study revealed that only 6% of this eligible group were credit active in CY 2019, nearly 9 million people

Although India had the smallest percentage of credit active Gen Z consumers of all the countries studied, in a country as populous as India, 6% represents nearly 9 million consumers. Even among older Indian generations, credit participation is relatively low, as just 10% of the total adult population is credit active.

“Gen Z is the first generation of digital natives, and they have come to expect a seamless consumer experience across all walks of life – including how they access, use and manage credit,” said Abhay Kelkar, vice president of research and consulting for TransUnion CIBIL. “Our belief is that the desire for credit among this generation is significant and growing at a faster pace than any other generation. As well, the way they apply for and use credit will likely generate an even greater level of demand. Our study shows it is critical for lenders to have the ability to make more informed decisions on prospective customers, including those who are new to credit and have limited or no formal credit histories, and earn their trust as well as their business.”

Gen Z Consumer Credit Usage

The majority (80%) of Indian Gen Z consumers who are credit-active only have one open credit product. The most commonly held products are two-wheeler loans (21%), consumer durables loans (13%), and credit cards (11%).

The percentage of credit-active consumers with two-wheeler loans is higher among Gen Z consumers than any other generation. In comparison, the percentage of credit-active Millennials (consumers born between 1980 and 1994) with two-wheeler loans is less than half that of Gen Z at just 10%, and for Gen X (consumers born between 1965 and 1979) the figure is even smaller at 6%.

Kelkar observed: “The popularity of two-wheeler loans among Gen Z consumers in India is a reflection of where this generation is in its career earnings and wider credit journey. For most, they are unable to afford a car, and having a motorbike or scooter is a convenient and often necessary way to get to work.”

Consumer durables loans are usually used by the broader population to finance large ticket purchases. However, as the second most popular consumer credit product among Gen Z consumers, they are most likely to be used to buy a smartphone, personal computer or laptop, or even a television, rather than household appliances like refrigerators or washing machines often preferred by older generations. 

For Gen Z, credit card participation is growing, but remains low compared to the wider national average. Looking at the entire adult population in India, overall credit card penetration among credit-active consumers is 21%. While 11% of Indian Gen Z credit-active consumers with a credit card is fairly low compared to other countries in the study (Hong Kong and Canada have rates above 90%), it’s encouraging for lenders that the youngest generation is adopting cards early in their credit life.

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