Generation Z move to credit, and 66% get clothing loans – study

A newly released research study by TransUnion shows that South Africa’s Generation Z (Gen Z) consumers (born in or after 1995) are becoming increasingly credit active and helping fuel the growth of the consumer credit market.

The report said that the most commonly held products among credit active South African Gen Z consumers were clothing loans. “Gen Z are eight times more likely to have this product than non-bank personal loans, the next most popular consumer credit product (8% credit activity),” said Carmen Williams, a research and consulting director at TransUnion South Africa.

She said Gen Z consumers were the first generation of digital users who communicate with smartphones and have unlimited internet access. “They engage with their peers through social media, making them more comfortable with building relationships with companies online.”

She said just five percent of South African Gen Z consumers had a credit card due to the country’s generally conservative lending practices that focus on low risk borrowers with longer credit histories.

“Instead, credit issued by retailers is the most widely held product. More than six in 10 (66%) credit-active Gen Z consumers in SA have a clothing account, a credit line issued by clothing or apparel retailers.”

By comparing data from other countries, TransUnion said the study was the first of its kind to examine the credit profiles and products of Gen Z. “For the study, we selected six countries (Canada, Colombia, Hong Kong, India, South Africa and the US) to identify commonalities and differences in Gen Z consumers across continents.

“These countries represent both well-established credit economies, such as the US, and still developing credit economies, such as Colombia and India. In most countries we studied, Gen Z consumers make up a significant portion of the population.”

The regions with emerging credit economies like Colombia, India and SA showed that less than half the Gen Z population was credit active compared to other developed economies such as Canada, Hong Kong and the US. In the US and Canada, the credit active population represents two-thirds of Gen Z consumers over 18, and in Hong Kong 49% the Gen Z population was credit active.

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