File Image: IOL
File Image: IOL

Generation Zs find credit to their liking

By Supplied Time of article published Feb 21, 2020

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Generation Z consumers - those born in or after 1995 - are highly dependent on credit to cover their spending and are helping to fuel South Africa’s burgeoning consumer debt, particularly unsecured debt.

This is according to newly released research by credit bureau TransUnion, which shows that:

* Almost 1.7 million Gen Z South African consumers are credit active;

* Clothing accounts, personal loans and credit cards are the most widely held products;

* Secured debt products, such as home loans and vehicle finance, are also popular; and

* Most credit-active Gen Z consumers are in the sub-prime and near-prime risk categories. However, nearly one-third have prime and better risk scores.

The TransUnion study explored credit activity of Gen Z consumers in emerging credit markets including South Africa, Colombia, and India, as well as in established markets such as Canada, Hong Kong and the US. It explored credit data of the second quarter of last year.

The percentage of the South African population classed as Gen Z, between the ages of 0 to 24, was 46%, representing almost 27.5million people.

The percentage that was Gen Z and over 18, and thus eligible to apply for credit, was 10% (almost 6million people).

The study found that more than a quarter (28%) of this eligible group were credit active - almost 1.7million people. This is considerably lower than the US, for example, where 66% of over-18 Gen Zs are credit active.

The study found the most commonly held credit products among credit-active South African Gen Z consumers are clothing accounts (66% of this group have them).

They are eight times more likely to have this product than non-bank personal loans, the next most popular product (8%).

Although clothing loans were the most widely held product, the auto finance category was highest in amount of debt owed.

There was a strong appetite for credit despite many people growing up in difficult economic conditions, including the financial crisis of 2008. Technological advances have also been a factor, with this generation having never known a time when mobile, online and app-based services were not available.

“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 Carmen Williams, director of research and consulting for TransUnion South Africa. 


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