How has the pandemic reshaped the demand for credit?

  • By Christine St Anne

There are some bright spots in particular areas of credit while one sector remains remarkably stable, according the latest data from Experian. 

Experian general manager of credit services Tristan Taylor provided some insights into the credit landscape including key growth areas.

“We’ve seen a significant decrease in demand across the board for traditional unsecured lending products, with credit cards and personal loans both down 50 per cent from the start of March to early September,” Taylor said.

However, there have been some bright spots in some specific areas, such as loans to purchase used vehicles, as people look to avoid public transport. 

He adds that application volumes for mortgages have been remarkably stable.

In fact, latest data from the Australian Bureau Statistics reveals a robust mortgage market

“There is a very good chance that as COVID-19 comes under control, the property market and mortgage lending respond well.

“With all that said, the government’s recent announcement about unwinding responsible lending obligations could provide a boost to growth across the entire industry.”

But for Taylor there is  strong shift  from new loans to refinancing, underpinned by low rates and uncertainty. 

On his numbers, the total amount of lending decreased 5 per cent from the start of the calendar year. 

RFi Group data also reveals that refinancing remains a key battle ground for lenders

Amid the pandemic, Taylor notes that buy now, pay later has garnered strong demand over the last few months particularly during the early stages of lockdown, where online retailers ran significant sales at the same time as stimulus funds were made available.

Indeed, it is the BNPL sector remains a key growth area, according to Taylor. 

“Credit cards are being challenged by BNPL, Small Amount Credit Contract (SACC) and Medium Amount Credit Contract (MACC),” he said adding that consumer leasing are under increasing regulatory pressure. 

“We have seen some significant growth in disruptive models such as peer-to-peer lending over the last five or so years, but that growth seems to have slowed somewhat going into 2020.” 

With the rise and rise of BNPL, Experian remains actively engaged with providers operating in the sector. 
 
“Experian is proud to partner with some prominent BNPL services for whom credit eligibility assessments are an important aspect of controlling risk.

“We share a common view held across the industry that broader sharing of credit information enables lenders to make better decisions and enables consumers to build their credit history.”

For Taylor, Experian will continue with working with the banks and associations like the Australian Retail Credit Association to help people manage their credit obligations amid the health pandemic. 

“The health pandemic has seen a significant coming together of the broader industry to align on the best approach to credit reporting through the pandemic. 

“At the core of the approach has been a guiding principle centred around doing no harm to the long-term credit prospects of people impacted by COVID-19.”