Consumer Credit Market

Market Overview

The global consumer credit market size was valued at USD 12.53 billion in 2023. It is estimated to reach USD 18.05 billion by 2032, growing at a CAGR of 4.14% during the forecast period (2024–2032). In recent years, the increasing demand for loans from individuals and small businesses and numerous benefits provided by consumer lenders are boosting the growth of the global consumer credit market. The rise of e-commerce, the sharing economy, and new payment methods affect credit demand. Moreover, younger generations are often more open to digital credit products and alternative lending models.

Consumer credit is the use of credit by individuals for personal, family, or household needs. It entails borrowing money to make purchases or meet financial obligations, with the understanding that the borrowed funds will be repaid over time, usually with interest. Consumer credit is a common financial arrangement that allows people to borrow money for various purposes without having to pay the entire amount upfront. In other words, consumer credit refers to short- and intermediate-term personal loans taken out by individuals to finance the purchase of goods and services for personal use. A finance fee is charged for the approval of credit or the extension of existing credit, which can be presented in the form of a cash loan or by a seller as sales credit. They are commonly available in the form of non-revolving loans that must be repaid in a set number of payments, as well as revolving loans for automobiles, consumer goods, home repairs, and personal loans.

Highlights

• Debit cards dominate the payment method segment.
• Revolving credits dominate the credit type segment.
• Banks dominate the issuers segment.
• North America is the highest shareholder in the global market

Market Dynamics

Global Consumer Credit Market Drivers

Increasing Demand for Loans from Individuals and Small Businesses

The growing demand for loans from individuals and small businesses is fueling the expansion of the personal loan market. The revenue growth in the global consumer credit market is significantly driven by the widening gap between income and expenditure, as well as the increasing financial needs of consumers. Financial institutions respond to this trend by offering a wide range of personal loan products tailored to meet various needs, such as unsecured personal loans, debt consolidation loans, home improvement loans, medical loans, and other specialized products. This product diversification reflects the broad spectrum of borrowers' financial requirements.

For instance, in July 2023, Jenius Bank introduced consumer-focused personal loans designed to help customers save thousands on high-interest debt. These loans offer flexible terms and discounted rates to cater to a variety of financial circumstances, especially in a context where many individuals are seeking ways to reduce debt and bolster their savings. Innovative approaches like this are driving the rapid growth of the consumer credit market. This is expected to drive market growth.

Global Consumer Credit Market Restraint

Lack of Security and Privacy Concerns

Although the digital payment industry is rapidly expanding due to rapid technological advancements, there are some drawbacks to using digital payments in various end-user industries. Security and safety concerns are regarded as one of the primary disadvantages of digital payments. The digital payments ecosystem is vulnerable to unauthorized participants, fraud, and data breaches without adequate security measures. Inadequate security settings will lead to the loss of information for both consumers and businesses, resulting in stolen money for users and significant financial losses for businesses.

Moreover, many people are concerned about the lack of privacy and anonymity when using digital payment methods. Customers may be concerned that their information will be used by third parties without their consent or that they will be identified in connection with their own or another person's payment. As a result, this factor impedes the expansion and growth of the consumer credit market.

Global Consumer Credit Market Opportunities

Internet Expansion and Smartphone Adoption

With the rapid growth of the internet and smartphones in the global digital payments market, some profound and far-reaching effects have been observed on consumer and business activity. Digital payments enable anyone to conduct retail transactions using an internet-connected device 24 hours a day, 7 days a week, regardless of whether they are physically present at the point of sale. Recently, the External Affairs Minister (EAM) S Jaishankar highlighted India's outstanding development in digital payments. He said that the nation now uses the Unified Payments Interface (UPI) to make monthly transactions worth Rs 120 crore.

He contrasted this by pointing out that digital transactions in the US only total Rs 40 crore annually. This availability enables consumers to make purchases and pay for services quickly and easily, eliminating the need to carry cash or use bank or credit cards. Therefore, payment service providers can easily connect electronically to the devices customers use to complete retail transactions, allowing reliable funds transfers in the consumer credit industry to be completed quickly, securely, and efficiently. This factor will provide growth opportunities for the consumer credit market in the coming years.

Regional Analysis

North America Dominates the Global Market

Based on region, the global consumer credit market is bifurcated into North America, Europe, Asia-Pacific, Latin America, and the Middle East and Africa. 

North America is the most significant global consumer credit market shareholder and is expected to expand substantially during the forecast period. Due to the solid financial infrastructure, widespread consumer knowledge, and early embrace of digital payment systems. The region's leading position can be ascribed to the presence of major players in the industry. These include Citigroup Inc., JPMorgan Chase & Co., Wells Fargo & Company, Bank of America Corporation, American Express Company, HSBC Holdings plc, Industrial and Commercial Bank of China, U.S. Bancorp, BNP Paribas, and TD Bank, N.A. These companies utilize a range of tactics to boost their market share, such as engaging in mergers and acquisitions, forming partnerships and joint ventures, securing license agreements, and introducing new products to the market. The Nilson Report stated that as of the end of 2022, the United States had USD 1.071 trillion in outstanding balances on general-purpose credit cards—a 14.7% increase from 2021. Visa has the biggest market share among credit cards in terms of outstanding balances: Visa: USD 502 billion, 47%; Mastercard: USD 336 billion, 24 percent. Moreover, various factors contribute to the growth of the consumer credit market, including demographic shifts and the behavior of the millennial generation, rising education and healthcare costs, advancements in credit products, global economic patterns, and changes in regulations.

Asia-Pacific is the fastest-growing region during the forecast period. With the steady rise in consumer income levels, the growing popularity of digital payment systems, and the wider availability of loans and credits, it is clear that the financial landscape is undergoing significant changes. The region's growth is fueled by countries like China, India, and South Korea, with a rising demand for consumer finance. India has also experienced significant growth, technological disruption, and structural changes in its credit industry over the past decade. Given the emergence of FinTechs in the industry, credit cards still have a considerable distance to cover. According to Home Credit India's annual "How India Borrows (HIB) Survey 2023," the local branch of the multinational consumer finance company, 59% of borrowers have received loan messages on the instant messaging app. This indicates that WhatsApp is becoming a significant channel for digital loan disbursal. Moreover, the region's growth is fueled by the rising demand for consumer finance, propelled by the expanding middle-class population and growing disposable income.

Segmental Analysis

The global consumer credit market is bifurcated into payment methods, credit types, and issuers.

Based on payment methods, the global consumer credit market is segmented into direct deposit, debit card, and others.

Debit cards dominate the payment method segment. This dominance is due to several factors, including increased debit card use, use for essential purchases, and stimulus payments' impact on people's bank accounts. Debit or prepaid cards accounted for 60% of all cards in the United States in 2022. The impact of government stimulus payments has also bolstered debit card use. These payments, distributed to support individuals during economic downturns, often flow into bank accounts and are readily accessible via debit cards, leading to a surge in debit-based transactions. For instance, the Vice Chairman of Visa Inc. noted that debit card transactions grew by 12% in May 2020, outperforming credit card transactions, which were still down 21% despite improving by 9 points from the previous month. This rapid growth in debit card use is apparent across various spending segments and ticket size bands, with debit card transactions gaining a notable share even in higher-value purchases.

Based on credit type, the global consumer credit market is segmented into revolving credits and non-revolving credits.

Revolving credit plays a leading role in the consumer credit market because it offers borrowers the flexibility to borrow, repay, and borrow again within a preset credit limit. This feature makes it a popular choice for consumers who need credit for regular expenses or unforeseen costs. The convenience and adaptability of revolving credit have contributed to its growth and dominance in the consumer credit market. Revolving credit permits constant access to funds as long as the credit limit is not surpassed, in contrast to term loans, which require borrowers to repay a lump sum amount over a certain length of time. This flexibility enables consumers to manage cash flow effectively, making revolving credit ideal for everyday purchases, emergency expenses, or short-term financing needs.

Based on issuers, the global consumer credit market is bifurcated into banks, NBFCs, and others.

Banks dominate the global market. This is because of their long history, loyal customer base, and extensive branch networks. Banks provide a variety of credit products, such as personal loans, credit cards, and home loans, to meet diverse customer needs. Banks also have a strong brand reputation, which helps them attract and retain customers. Banks have also collaborated with FinTech companies to improve their services and meet the increasing need for digital payments. For example, in June 2021, it was announced that more than 2 million 'Amazon Pay ICICI Bank credit cards were issued by ICICI Bank and Amazon Pay. FinTechs have introduced logical and innovative changes that can facilitate the expansion of the credit industry. They are revolutionizing this industry with their top-notch offerings by utilizing the existing data of banks and API stacks.

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.

Recent Developments

• October 2023- Mastercard partnered with Instacart and Peacock to provide greater everyday value and convenience where it matters most to consumers. Mastercard’s U.S. consumer credit card products empower cardholders with access to over USD 60bn+ in meaningful rewards and benefits. Moreover, new offerings from Instacart and Peacock bring value directly to consumers, who frequently spend.
• June 2022- Finastra launched an embedded consumer lending solution, enabling access to traditional regulated lending options for consumers at point-of-sale (POS). Financial institutions, distributors, and merchants will benefit from a platform that makes it easy for their customers to access lending options.