At the mid-point of 2023, Gen Z consumers (born between 1995 and 2005) increasingly find themselves with new access to credit products.
The newly released Q2 2023 Quarterly Credit Industry Insights Report (CIIR) from TransUnion (NYSE: TRU) shows “that relative to the consumer population as a whole, Gen Z consumers continue to turn to bankcards and unsecured personal loans even as lenders have begun to tighten underwriting.”
TransUnion’s most recent Consumer Pulse findings from July 2023 found “that 50% of Gen Z consumers – compared to 32% for the entire population – are planning to apply for new credit or refinance existing credit (e.g., student loan, credit card, personal loan, car loan/lease, mortgage) within the next year.”
This percentage is “a marked increase from the 41% of Gen Z consumers who said they planned to apply for credit or refinance in the July 2022 report.”
Michele Raneri, vice president of U.S. research and consulting at TransUnion, said:
“It makes sense to see Gen Z consumers’ use of credit cards and personal loans increase relative to consumers as a whole as they age into financial independence. Like the overall population, many Gen Z borrowers are facing the same financial challenges brought on by high interest rates and inflation. As a result, they are tapping into these available credit products to help them cope with rising expenses and the tightening of their monthly budgets.”
Bankcard balances once again “reached a new record high of $963 billion in Q2 2023, up 17.4% year-over-year (YoY).”
Among Gen Z consumers, total balances “increased 51.9% YoY and now stands at $55 billion, representing 5.7% of all balances.” Unsecured personal loan originations “fell overall YoY for the second consecutive quarter, down 16.1%.” Within the overall population, originations among Gen Z consumers “were 493K in Q1 2023, representing a smaller 7.6% decrease YoY.”
The report also found “that lenders are continuing to increasingly focus on less risky credit tiers when considering new originations across a number of credit products, particularly impacting subprime borrowers.”
For instance, auto originations in Q1 2023 “were down 11.6% among subprime borrowers YoY – and down 21.3% as compared to pre-pandemic 2019.” Among unsecured personal loans, subprime originations “for Q1 2023 were down 26.1% YoY.”
As noted in the update, bankcard originations “hit a new record high in Q1 2023, up 0.3% YoY to 18.98 million.” Originations in Q1 2023 were primarily “driven by growth in the prime plus and super prime risk segments – this stands in contrast to Q1 2022, when the subprime and near prime risk tiers drove growth.”
Bankcard balances reached “a new record high of $963 billion in Q2 2023, representing a YoY growth of 17.4%.” The number of cards held per consumer “has increased to 2.9 in Q2 2023, and the average balance per consumer has risen to $5,947, the highest in the past ten years.”
Total credit line once again “set an all-time record for the fifth consecutive quarter, rising to $4.5 trillion, representing a YoY increase of 9.6%.” However, while total credit line continues to grow, total utilization has “remained in check, remaining below 22% in Q2 2023.”
Average credit limit per consumer “reached a new all-time high for the second consecutive quarter at $24.9K, a YoY growth of 6.4%. 90+ DPD consumer level bankcard delinquency was at 2.06% in Q2 2023, up from 1.57% in Q2 2022, but representing a decline of 20 bps quarter-over-quarter (QoQ).”
Paul Siegfried, senior vice president and credit card business leader at TransUnion, said:
“Bankcard balances continue to grow; however, consumers are distributing those balances across more cards than they have in the past, which has resulted in balances per account remaining within normal limits. Lenders have seemingly made a clear shift in acquisition strategy as, following two consecutive quarters of record originations, subprime’s share has declined significantly for the second quarter in a row, while super prime’s share has increased to that of pre-pandemic levels.”
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