Australian Consumer Credit 2019: Review, Forecasts, and Future Opportunities

1.1. Market summary
1.2. Key findings
1.3. Critical success factors

2.1. The consumer credit marketwill remain stagnant after several years of negative growth
2.2. Falling interest rates and easy access to home loans have made secured lending more competitive against variable rate loans
2.3. Consumer credit has been badly hit by the rise in mortgage borrowing
2.4. A high debt servicing ratio combined with incentives for home ownershippush consumers away fromhigher-interest consumer debt
2.5. Credit cards are in danger of losing their lending hegemony due to the growing popularity of personal loans

3.1. The economy is currently expected to rebound after a difficult 2019 but is likely to be significantly revised down due to COVID-19
3.2. Confidence shatters to new depths, re-enforcing lower growth expectations and pushing consumers to save instead of borrow

4.1. Changes in methodology and loan book exchanges have helped consolidate market shares for the largest lenders
4.2. ANZ’sstrict credit measures mean it leads on consumer sentiment, butnot market share
4.3. Banks can achieve higher cross-selling by allowing customers to prove their creditworthiness
4.4. BNPLis on the verge of becoming mainstream
4.5. BNPL’s low cost and lax creditworthiness conditions threaten the on-demand credit hegemony of credit cards
4.6. Companies wishing to expand their credit offering could follow CBA into the BNPL market
4.7. BNPL still faces problems, with pressure from regulators and the Senate leading the industry to self-enforce a new code of conduct
4.8. BNPL: the main players

5.1. Car finance is one of few bright spots for consumer lending
5.2. Banks can tap into dissatisfaction with specialist players
5.3. An omni-channel strategy will ensure lenders reach all potential borrowers

6.1. A new banking code has been introduced to combat misconduct and foster ethical behavior
6.2. ASIC grants licenses to alternative credit providers to provide greater competition to the market

7.1. Abbreviations and acronyms
7.2. Methodology
7.3. Secondary sources
7.4. Further reading

Figure 1: The consumer credit market is forecast to continue shrinking until 2021
Figure 2: Lower central bank interest rates have made variable personal loans uncompetitive
Figure 3: Consumer credit has been sidelined by Australians in favor of lower-rate home loans
Figure 4: Australia’s high debt servicing levels make it harder for lenders to sell higher-interest consumer debt
Figure 5: Falling interest rates have cushioned borrowers over the last decade
Figure 6: Personal loans have gained appeal among young consumers, to the detriment of credit cards
Figure 7: GDP growth was significantly below the trend rate in 2019,while inflation remained stable
Figure 8: Wage growth has crept up in the last year but is well below long-term averages
Figure9: COVID-19 has made businesses and consumers wary of the future
Figure 10: Market share changes have been the result of significant deals and revisions to methodologies
Figure 11: In a stagnant market, growth in personal loans has been at the expense of credit cards
Figure 12: ANZ is streets ahead of its rivals for NPS on consumer loans and mortgages
Figure 13: CBA and ANZ lead the way on cross-selling
Figure 14: Westpac has sought to differentiate its brands to capture different segments for personal loans
Figure 15: BNPL growth is expected to continue for the next few years
Figure 16: Food-based retail sales growth is much higher than fast fashion, which most BNPL providers arenot taking advantage of
Figure 17: BNPL repayments with credit cards are made by higher earners who can afford credit interest
Figure 18: Afterpay’s website feels more like Myer or David Jonesthan a credit provider
Figure 19: Lady Gaga helped Klarna share its brand among her 180 million social media followers
Figure 20: Zip offers customers a much wider range of retail options, as well as the ubiquitous fast fashion
Figure 21: The Australian motor finance market is expected to experience almost continual growth for 15 years
Figure 22: Banks should capitalize on subsectors considered bad and minimize threats from those doing well
Figure 23: Significant numbers of frequent digital users still prefer to use multiple channels when arranging to borrow money, particularly bank branches
Figure 24: One of several reviews criticizing CBA’s personal loan process for its lack of clarity