Exploring the Growing Role of Gen Z Consumers in Credit Trends
The credit landscape is witnessing a significant shift as Gen Z consumers, those born between 1995 and 2005, emerge as a prominent force in credit markets. The recently released Q2 2023 Quarterly Credit Industry Insights Report (CIIR) by TransUnion (NYSE: TRU) sheds light on the evolving credit behaviors of Gen Z individuals. Despite tightening underwriting standards, Gen Z continues to embrace credit products such as bank cards and unsecured personal loans.
The Gen Z Momentum: A Glimpse into Q2 2023 CIIR Findings
As we reach the midpoint of 2023, Gen Z is stepping into the world of credit products with renewed vigor. TransUnion’s Q2 2023 report highlights a noteworthy trend – Gen Z consumers are increasingly turning to bankcards and unsecured personal loans, even amidst the changing lending landscape.
According to TransUnion’s Consumer Pulse findings in July 2023, a staggering 50% of Gen Z consumers, compared to 32% of the general population, are gearing up to apply for new credit or refinance existing credit (such as student loans, credit cards, personal loans, car loans/leases, and mortgages) in the coming year. This uptick is a substantial jump from the 41% of Gen Z consumers who expressed similar intentions in the July 2022 report.
Michele Raneri, Vice President of U.S. Research and Consulting at TransUnion, offers insights into this phenomenon. She states, “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 on the Rise: A Look at Q2 2023 Figures
One of the most remarkable findings of the report is the surge in bankcard balances, reaching a record high of $963 billion in Q2 2023. This marks a significant 17.4% increase from the previous year. Among Gen Z consumers, the story is no different. Their total bankcard balances witnessed a staggering 51.9% YoY increase, now standing at $55 billion. This accounts for 5.7% of the overall balances, showcasing Gen Z’s growing financial footprint.
Interestingly, while unsecured personal loan originations observed an overall 16.1% YoY decline in Q2 2023, the Gen Z segment demonstrated resilience. Among Gen Z consumers, unsecured personal loan originations dropped by a smaller 7.6% in Q1 2023 compared to the previous year. This nuanced trend speaks to Gen Z’s adaptability and strategic financial decision-making.
Gen Z’s Impact on Total Credit Card Balances
- Q2 2023: Total Credit Card Balances (Bankcard) reached $963 billion.
- Q2 2022: Total Credit Card Balances (Bankcard) stood at $821 billion.
- YoY Change: A notable increase of 17.4% was observed.
- Gen Z’s Total Credit Card Balances (Bankcard) soared to $55 billion.
- Gen Z’s Share of Credit Card Balances (Bankcard) rose to 5.7%, reflecting a 29.5% increase from the previous year.
As Gen Z emerges as a significant force in credit markets, their credit behavior is poised to shape the financial landscape in unprecedented ways. The Gen Z cohort’s proactive engagement with credit products, even amid challenges posed by interest rates and inflation, underscores their financial acumen and the role they will play in influencing credit trends in the years to come.
In Conclusion: Gen Z’s Credit Trajectory
TransUnion’s Q2 2023 CIIR provides a comprehensive snapshot of Gen Z’s growing impact on credit markets. With a propensity for embracing credit cards and unsecured personal loans, Gen Z’s financial independence journey is underway. As they navigate economic complexities, their ability to adapt, strategize, and make informed credit decisions positions them as a key driving force in shaping the future of credit trends.