Huanlian: The number of inquiries for Hong Kong revolving loans in the period from September to November last year increased by 25.2% year-on-year.

According to the Credit Information Services Bureau Huanlian's "Credit Industry Analysis Report," released during the period of September to November 2024, the number of inquiries for revolving loans in Hong Kong increased by 25.2% year-on-year, while the number of new accounts (a measure of the number of new accounts opened) also increased by 76.4% year-on-year during the period of June to August 2024 (due to reporting mechanisms, this is the most up-to-date data currently available). Despite the significant increase in the number of new loans, the average credit amount for these new accounts dropped by nearly one-third (32.8%). Two-thirds (66%) of the new loans came from digital banks, which attract consumers with efficient and quick approval processes, aiming to expand their customer base through revolving loans. As digital banks increase their market share in the revolving loan market, the credit amounts for revolving loan products also decrease, mainly because digital banks generally have a lower risk appetite than traditional banks that tend to offer larger credit amounts. Due to the decrease in credit amounts for new loans, the outstanding payment obligations decreased by 5.1% year-on-year in the three-month period ending in November 2024, and the average outstanding balance per account also decreased by 14.8%. Nevertheless, the revolving loan market still performed strongly, with a 6.2% year-on-year increase in related loan accounts, and a 11.5% increase in consumers holding active revolving loan balances, indicating significant growth potential in the market. The growth in revolving loans mainly comes from young consumers, as well as consumers who actively integrate credit products into their e-wallets for online shopping and cross-border consumption. Millennials accounted for 40% of recent new revolving loans, while Gen Z accounted for over 30%. In the three-month period ending in November 2024, the number of new loans for Gen Z increased by over 127.8% year-on-year. Sun Weihan, Chief Advisor of Research and Consultancy at Huanlian Asia Pacific, stated that an increasing number of Hong Kong consumers are using revolving loans provided by digital banks, reflecting a more diversified portfolio of credit products among consumers. These products make consumer transactions simpler, while more consumers hold related balances, which may be related to the lower interest rates of revolving loans compared to traditional credit products like credit cards. While the revolving loan market is growing rapidly, there is also an increase in the delinquency rate. By the end of November 2024, the proportion of accounts with delinquent payments of 60 days or more increased by 8 basis points year-on-year, reaching 0.7%. Sun Weihan added that, despite the need to monitor the rising delinquency rates, this increase stems from the significant growth of the overall revolving loan market, and the rapid popularity of these products is influencing the credit behavior of consumers across different generations, especially the Millennials and Gen Z who seek fast approval and convenience with revolving loans. Financial institutions that can effectively utilize innovative monitoring solutions to continuously assess consumer behavior can effectively mitigate the risks of rising delinquency rates.