Surge stemmed from Gen Z consumers and new immigrants, report says
A new record high of 31.2 million Canadians used at least one credit product during the third quarter, according to the latest quarterly report from TransUnion.
The study noted that the surge stemmed from an influx of Generation Z consumers (born between 1995 and 2010) coupled with a significant volume of new Canadian immigrants entering the credit market.
The number of credit originations grew by 8.7% year-over-year in Q3 2023. Canadians in the millennial (born between 1980 and 1994) and Gen Z cohorts collectively represented 56% of all new originations, with activity involving Gen Z consumers alone spiking by 35% annually.
Originations involving newcomers to Canada grew by 62% during the same period, accounting for 11% of all newly originated credit products in Q3.
Matthew Fabian, director of financial services research and consulting at TransUnion Canada, said that these trends are likely to persist, considering that 40% of Gen Z-ers indicated plans to either apply for new credit or refinance their existing credit.
“New-to-credit consumers, whether they’re younger consumers becoming credit-eligible or new immigrants, present a high-potential opportunity for growth, as this segment has an appetite for credit products and they exhibit good credit behaviours,” Fabian said.
“While many are seeking initial access to credit – most often a credit card or personal loan – this segment can create a base of loyal customers who could become increasingly profitable as their needs and financial capacities continue to grow.”
The cost of borrowing in Canada is now the highest it’s been since 2001. https://t.co/gj6SGhWwf7#mortgagenews #mortgageindustry #ratehike #interestrates
— Canadian Mortgage Professional Magazine (@CMPmagazine) July 14, 2023
Accelerated demand to lead to more than $13 billion in additional credit by 2025
Credit card balances continued to experience robust growth, growing by 9% annually to reach an average of $4,265.00.
Taking these into account, TransUnion is anticipating accelerated demand for more than $13 billion in additional credit to new consumers by 2025.
Fabian said that this highlights “the need for lenders to adapt their strategies to offer appealing products, convenience, and benefits, along with appropriate credit lines and pricing.”
“We have seen a shift in credit card spending and balance-built behaviours through 2023, with the increased cost-of-living and debt, along with stronger consumer spending, being significant factors leading to the recent rise in credit card balances,” he added.
