Consumer Credit Market

Market Overview

The global consumer credit market size was valued at USD 7.84 trillion in 2022. It is projected to reach USD 12.06 trillion by 2031, growing at a CAGR of 4.9% during the forecast period (2023–2031).

Consumer credit is a loan taken by a borrower to purchase goods and services. Any type of personal loan taken to buy everyday goods and services can be considered as consumer credit. Consumer credit is extended by banks, financial institutions, and Non-Banking Financial Companies (NBFCs) that enable consumers to purchase goods immediately and pay off the cost over time with interest. It allows the borrowers to get advance on income based on their credit scores and transaction history.

The increasing adoption of cashless transactions, growing demand for loans, owing to a surge in disposable income, and rising adoption of automation among all industry verticals fuels the market growth. However, cybercrime and operational failures, political uncertainties, and unpredictable lender behavior hinder the market growth.

Market Dynamics

Increasing Adoption of Cashless Transactions

Over the past few years, a significant increase is witnessed in the adoption of cashless transactions among all industry verticals. The growth can be attributed to the increasing government initiatives to promote cashless transactions in order to improve productivity and efficiency. For instance, in October 2018, the Government of India launched the Digital India initiative, which promotes the cashless transaction. Moreover, the increasing penetration rate of smartphones and ATM machines fuels the market growth.

Segmental Analysis

Cloud or Digital Consumer Credit Segment to Witness Massive Demand from the Finance Sector

Cloud or digital consumer credit is an online method of lending and borrowing credit. Growing internet penetration and the advent of innovative technologies, such as cloud, big data, and AI, have urged banks and non-banking institutions to leverage such technologies to improve their offerings.

Cloud or digital lending is the fastest-growing segment and is gaining popularity among financial companies and institutions as they can afford the installation charges of sophisticated software. The adoption rate of Cloud/Digital lending is projected to enhance productivity and save trillions of dollars by 2030. Online portals work even faster and can take decisions in minutes and deposit funds in an account in a few hours or days. There is no application fee or pre-payment penalty. Incorporating AI in banks and financial institutions with a programmable algorithm helps in monitoring consumer data and analyze credit scores with a high degree of accuracy before offering a loan.

The rising number of Fintech companies is expected to boost the consumer credit market growth as they can bring new assets to the cloud or digital credit offerings. In October 2018, the U.S. banking company, BBVA Compass Bancshares, partnered with OnDeck, an online small business lending company.

Vehicle Loan Segment to Witness Significant Growth during the Forecast Period

Rapid developments in the automotive industry and surging disposable incomes are the prime factors driving the demand for vehicle loans across the globe. Vehicle loans are another form of liquidity lending that is permitted in certain states. A short-term vehicle title loans usually range from 30 days to a consecutive 12-month period.  There is a growing trend of payday lenders offering vehicle title and installment loans.

Close to 14.8% of the U.S. households have used payday and vehicle title loans in the 2017 year, as per the U.S. Government Survey. About 41 Texas municipalities have put forth business regulations on payday lending and vehicle title lending. Authorities in Dallas, El Paso, Houston, and San Antonio have imposed limits on the number of rollovers and the repetitive loans, and other requirements. Vehicle loan arrangers are regulated and subject to licensing, reporting, and needs to offer consumers with disclosures about repayment and re-borrowing rates. 

Impact of covid-19

COVID-19 has had an unprecedented effect across all industry verticals globally. The market of consumer credit has witnessed a significant rise amid the pandemic on account of the rising demand for cashless transactions. Moreover, rising online shopping post-pandemic COVID-19 to maintain the social distancing norms is boosting the demand for consumer credit day by day.

Regional Analysis

Stable Economic Growth in the U.S. to Drive North America's Market Growth

Credit cards are one of the most commonly held financial products in North America, with over 170 million Americans holding one or more credit cards. The U.S. consumer credit market remains stable on account of reduced unemployment and customer wage growth in the last few years. Smooth consumer credit flow in the U.S. has helped cardholders conduct transactions, buy consumer goods, and earn rewards with added security. High consumer satisfaction and reduction in the levels of consumers' debt is significantly driving the consumer credit market growth.

Most of the consumers in North America are securing loans and increasing their balances. Rising employment rates continued wage growth, and the region's sound economy has laid a helping hand in driving the consumer credit market. As per the Bureau of Consumer Financial Protection's Consumer Credit Card Report, the U.S.'s total credit card balances rose to USD 900 billion in 2018, higher than their pre-recession balances of USD 792 billion.

TransUnion, a Financial Services company, revealed that America's consumer credit card market witnessed a delinquency rate of 5.4% in 2018 compared to 2017. Therefore, flattening of the delinquency rate due to the balanced approach by lenders is eventually enhancing the consumer credit market performance by increasing the average consumer balance.

China and India to Bolster Asia-Pacific's Market Growth

The burgeoning middle class in China and India is driving the demand for consumer credit, wealth management services, and insurance. Technological advancements and increasing penetration of smartphones have compelled lenders and banks to focus on growing financial services access and offerings. For instance, PNB MetLife India Insurance Company Limited's virtual reality platform provides a reliable 'Phygital'(Physical + Digital) experience by allowing the customer into an insurance expert's office to talk across the table.

Consumer Credit Market Segmentation

By Type

• Cloud
• On-Premise

By Application

• Personal Loan
• Vehicle Loan
• Student Loan

By Region

North America

• The U.S.
• Canada
• Mexico

Europe

• The U.K.
• Italy
• France
• Spain
• Germany
• The Rest of Europe

The Middle East and Africa (MEA)

• Saudi Arabia
• Egypt
• South Africa
• The Rest of MEA

Asia-Pacific

• India
• China
• Japan
• Australia
• South Korea
• The Rest of Asia-Pacific

South America

• Columbia
• Brazil
• Chile
• Peru
• Argentina
• The Rest of South America