The latest Equifax study of credit card and loan applications across Australia suggests that the new generation of lenders are continuing to attract a new generation of informed, empowered and solution-savvy consumers.
According to the March quarter measurement of the volume of credit card and personal loan applications that go through the Equifax Consumer Credit Bureau, applications rose at a rate of 4.6 per cent compared with the same period in 2016.
The ongoing surge in personal loan applications - up 13.5 per cent on the same period in 2016 and 1.1 per cent on the last quarter - was a key driver of the tenth consecutive quarter of growth in the Index.
The figures show a continuing divergence in the growth of personal loans versus credit card applications. The sustained growth in personal loan applications continued to be predominantly driven by different products offered by new entrants in the personal lending market.
Angus Luffman, senior GM consumer products, Equifax, said the accumulation in personal loan applications was underpinned by new lending entrants with differentiated options for increasingly informed borrowers.
“The newer lenders are focusing their propositions on customer experience that is convenient and best meets consumer’s needs, in digital channels," he said.
According to Luffman, these propositions would more likely appeal to digital natives and younger, tech savvy consumers.
He noted that these consumers were embracing different ways of paying for their purchases, although they remained generally circumspect about taking on additional credit.
Service is key
Recent credit data from the Australian Bureau of Statistics (ABS), showed that new personal finance commitments in January grew by 3.9 per cent year on year.
"The growth in personal loans has, in large part, been driven by newer lenders who cater to consumer’s increasing demand for an online experience,” Luffman said.
Since its foundation almost five years ago, Society One - Australia’s largest marketplace lender - is providing more than $250 million in personal loans. A spokesperson for Society One told AB+F that the data from Equifax mirrors the Society One experience.
“We have seen a tremendous uplift in interest, applications and people taking out loans with us, particularly over the last year and into the first quarter. (Consumers) are attracted by the better interest rates tailored to their own financial circumstances and prefer the fixed monthly repayments and fixed terms which mean they are paying off their loans much quicker than credit card debt, which can easily blow out.”
According to Society One, service is “absolutely key to this".
Luffman told AB+F that the data shows that consumers are adapting to different payment options at the point of sale.
"While credit cards are being used more for everyday transactions, it is likely consumers are funding a greater number of higher value household purchases through personal loans,” Luffman said, suggesting that a shift was occurring in consumer behaviour.
"In the future, it is fair to say that there is focus on better customer experience right across the new and existing lender landscape,” Luffman added.