Consumers still optimistic about finances – study

Consumers are still optimistic about their finances, despite the current economic challenges of high inflation and interest rate hikes.

Their optimism is not misplaced, as about one third (34%) of households saw their income increase in the second quarter, with seven in 10 (72%) expecting their income to increase in the next year.

According to the latest findings from TransUnion’s Consumer Pulse Study for the second quarter, while consumer optimism reflected resilience and showcased the potential for recovery and growth, the financial status of households continued to vary widely between different demographics and age groups.

The findings show that six out of 10 (62%) of consumers expect they will be able to pay their current bills and loan obligations in the third quarter, although half (50%) of Gen X respondents (born between 1965-1980) are worried about their ability to pay all their bills.

Nearly six in 10 (58%) respondents already reduced discretionary spending, with 36% cancelling subscriptions or memberships, while 89% recognise the importance of access to credit and lending products for achieving their financial goals.

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However, only a third (34%) believe they have sufficient access to credit, while 92% of consumers believe keeping track of their credit reports is crucial for effective financial management and only 50% do so at least monthly and 21% never check their credit reports at all.

Almost half (48%) believed their credit scores would improve if businesses used non-standard data such as rental payments, gym membership payments, or buy now, pay later (BNPL) services to help calculate their scores.

Why consumers are optimistic

The study shows that salary increases (17%) and starting new businesses (15%) were the main drivers of increased income, while job losses (21%) and cuts in wages or salaries (17%) were the main contributing factors for the 24% of households who saw their income drop.

“While one third of families report an increase in their income, almost a quarter faced a decline. Most people remain optimistic about their future income, but the management of debt remains a major concern for their finances.

“As a result, we see consumers changing their spending behaviour by reducing discretionary spend and cutting back on big-ticket purchases. This could have knock-on effects in sectors such as retail, automotive and real estate in the short to medium term,” Weihan Sun, director of research and consulting at TransUnion Africa, says.

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Nearly six in 10 (58%) respondents reduced discretionary spending, with 36% cancelling subscriptions or memberships. Gen X and Baby Boomers (born between 1946-1964) made the most significant cuts in discretionary spending, at 67% and 79%.

Four in 10 Baby Boomers (41%) expected an increase in bills and loans, while Millennials (1981-1995) and Gen Z (1996-2012) intended to increase contributions to retirement funds and investments, reflecting a generational pivot towards securing long-term financial stability.

An overwhelming 89% of South African consumers recognise the importance of access to credit and lending products for achieving their financial goals. This sentiment is particularly prevalent among younger generations, but only a third (34%) believe they have sufficient access to credit, with only 31% of Gen Z consumers believing their access to credit is enough.

Consumers more careful with finances

Despite these concerns, only a third of consumers plan to apply for new or refinance existing credit in the coming year, with 29% planning to apply for a personal loan and 28% for a new credit card. Nearly half of those who intended to apply for credit or refinance abandoned their plans, due to the high cost of new credit (35%), fear of rejection due to income or employment status (26%) and finding alternative funding sources (23%).

Digital fraud remains an issue for South African consumers, with just over half (57%) reporting they have been the target of fraud schemes in the last quarter, while 9% fell prey to a scam. The most prevalent type of fraud attempts are money/gift card scams (37%), phishing schemes – where fraudsters try and get personal information through fraudulent emails, websites, or social media platforms (36%) and smishing -using text messages to trick recipients into divulging personal information (32%).

“Overall, it is clear that consumers are at risk of falling victim to scams. This indicates a significant need for stronger security measures and robust fraud prevention strategies in the digital space,” Sun says.