TransUnion: 1Q24 Credit Card Outstanding Balances of HK Consumers Rise 8.6%; Finance Companies Increasingly Dominant in Personal Loan Mkt


According to the 1Q24 Industry Insights Report from TransUnion (TRU.US)  -0.230 (-0.318%)   After 0.000%, consumer demand for new credit cards in Hong Kong remained subdued towards the end of 2023 as existing credit cards are already sufficient to meet consumer needs. However, the survey shows an 8.6% increase in consumers’ credit card outstanding balances, while average balances also elevated 7.5%. The growing credit card balances indicated that consumers are actively using their existing credit cards. Financial institutions also offered more credit lines in 1Q24.

According to the report, loans below $150,000 accounted for 17% of all active personal loans in Hong Kong. These small loans accounted for 27% of recent new loans and 25% of consumers currently holding personal loans. These loans were mainly serviced by finance companies, which accounted for 80% of new loans in the same quarter, compared to 10% each for traditional and virtual banks.

Weihan Sun, Principal of Research and Consulting for Asia Pacific at TransUnion, said finance companies are increasingly dominating the personal loan market, particularly for small and medium-sized loans. As these loans tend to be shorter term and relatively quicker to turn around, they represented a significant opportunity for financial institutions to re-borrow from consumers.

In addition, revolving credit is a product that focuses more on consumers in the subprime and sub-subprime risk categories than other credit products such as credit cards and mortgages. While these higher-risk consumers were expected to have higher delinquency rates, the report showed that the annualised delinquency rate for new revolving loans to these consumers has been increasing in recent years. This suggested that there may be reverse selection in the revolving loan market, whereby consumers more likely to be late on their payments have a higher propensity to choose revolving loans.