How millennials are shifting the dial on credit

  • By Mike Laing

With the rise and rise of new forms of credit like the BNPL sector, Australian Retail Credit Association’s CEO Mike Laing takes a close look at the attitudes and use of credit by millennials and how they will shape the industry. 

The number of credit cards in Australia has dropped, buy-now-pay-later products are surging and mortgage lending is sluggish. It seems these themes are making daily headlines lately. 

And rather than looking at the relentless growth in credit cards’ share of payments, or scrutinizing the regulatory landscape supporting the growth in buy-now-pay-later products, or unpacking regulatory and economic drivers behind house lending, I see many attributing the story behind the headlines to millennials – as if this generation is heralding a new era of credit. 

As baby boomers enter retirement and Generation X settles into middle age, millennials are the new force in Australia’s economy.  

Now 23-38 years old, many millennials are preparing for milestone purchases like their first car or first home. 

Millennials are the future of credit – so it makes sense to ask how that demographic fits in with what we’re currently observing in the credit industry. But any suggestions that millennials are transforming the use of credit may be premature. 

ARCA’s recent CreditSmart survey asked a broad range of Australians about credit use and attitudes. 

Looking at millennial responses to some of those survey questions, it is apparent that we’re not even speaking the same language. 


Fifty-three percent of millennial respondents said they “do not use credit under any circumstances,” and a further 32 per cent “avoid using credit unless it is absolutely necessary.” 

But compare that to findings on credit use, from the same survey: 70 per cent of millennials reported holding some form of financial credit product. 

I’d hazard that if we added telco or utility accounts to the survey, the number of millennials holding a credit account would be even higher.

The take-aways for industry is that millennials are keen users of credit – whether they know it or not.

Looking behind the inconsistency in attitude vs use, it’s relevant that the most popular source of financial credit for millennials according to our research is credit cards (59 per cent) followed by buy-now-pay-later (30 per cent).

Some buy-now-pay-later providers pride themselves on not providing “credit,” and while industry and regulators see the nuance to that claim, the above statistics suggest millennial consumers are taking the claim at face value. 

The take-aways for industry is that millennials are keen users of credit – whether they know it or not.

Digging deeper into use of credit among millennials, there’s a very telling intra-generational split. 

The most popular credit product for millennials under 25 years of age is buy-now-pay-later products (48 per cent), followed by credit cards (36 per cent). Millennials aged over 25 years are more likely to use credit cards (68 per cent), followed by mortgages (44 per cent) then buy-now-pay-later products (24 per cent).

This difference in millennials’ credit use on either side of the 25-year mark can be interpreted a few ways. 

Will buy-now-pay-later products continue to grow as the younger sub-section ages? 

It’s impossible to ignore the regulatory context here: we’re already seeing signs that as the buy-now-pay-later sector grows, it will face the same market and regulatory forces faced by credit cards. 

But that aside, I’d suggest that just as payday lending and instant cash are popular with younger demographics, customers use a more diverse (and more traditional) range of credit products as they grow older. 

After all, it’s hard to see the buy-now-pay-later sector extending to support customers making those milestone purchases. But that doesn’t mean new types of credit products won’t move in on that turf.

Looking again at some of the attitudes researched in our CreditSmart survey, we also see a disconnect in how much millennials understand traditional credit processes. 

Like most consumers, millennials know their credit report can be checked when they apply for a home loan. 

However they’re the least informed demographic when it comes to understanding what information is contained in their credit report, and what lenders look at when assessing a loan:

• 53 per cent are unaware that their credit report includes a list of their credit applications over the last five years; 

• More than half are unaware that their credit report includes any defaults listed by a credit provider on financial loans as well as telco and utility accounts; and 

• 54 per cent also think that a future employer checks their credit report when they apply for a job.

Our findings suggest that millennials are not hesitant to use credit, particularly at point of purchase – whether that’s through low value short term credit available through buy-now-pay-later products or by revolving credit options. 

Our research also suggests that like generations before them, millennials will move on to other credit products to support larger purchases and long-term goals. The question for them, and for us as industry, is what exactly those products will look like and who will be providing them?

In September ARCA will hold Executive Breakfasts in Melbourne and Sydney to explore the theme of Millennials – the future of credit?

Industry experts will look at:  

• What does credit mean to millennials?

• What lenders and products are ‘winning’ the millennial market?

• Can traditional mortgage providers appeal to millennials as likely first home-buyers, or will millennials see fintechs take over the mortgage market?

• Is there such a thing as brand loyalty these days?

• As tech leaders, how do millennials balance concerns around privacy and data use, with the desire for good customer experience and getting the best deal?

To register for the Melbourne event, click here

To register for the Sydney event, click here