INSIGHTS
Trestrictions and a rise in economic activity. The report also cited level 5 and 4 lockdown regulations, which restricted physical access to locations to apply for credit, particularly retail stores, as an additional factor. Supply-side constraints have also added to the Covid-related credit crunch, despite ample market liquidity. Prevailing economic conditions have weighed on credit origination as lenders continue to adjust their risk appetite, modify their underwriting models and retain a cautious approach to credit extension.
As a consequence, originations (measured by new accounts opened) fell by double digits year on year for all major consumer credit categories, according to the TransUnion report. The decline in Q2 2020 volume was most pronounced for clothing accounts down 69.4%. Credit cards were least
affected (-23.1%), primarily due to their utility during the lockdown. Consumers relied on cards as a payment and purchase mechanism to complete online transactions, says the report, which correlates with the e-commerce boom experienced in lockdown. These results show the changing dynamics of both the demand and supply sides of credit, affirms Carmen Williams, director of research and consulting for TransUnion South Africa. While predicting the extent of the pandemic s economic impact remains largely unknown and difficult to quantify as the
Tech is vital for recovery
However, the pandemic has highlighted critical gaps in the sector s ability to deliver effective digital journeys. Despite past investments, many decision-makers admit their effectiveness at engaging online customers has not improved sufficiently during the past two years and is not keeping pace with customer expectations says Pieterse. The pandemic exposed the need for lenders to enhance digital channels and re-engineer customer journeys, both for general account servicing and applications” adds Williams.
Embracing advanced digital front-end and onboarding solutions would simultaneously address the challenges of rising online fraud targeting consumers.
as the economy recovers. Commercial resilience, rebound and growth hinge on investment in digital innovation, insight and automation, says Ferdie Pieterse, CEO at Experian Africa. Unsurprisingly, 78% of decision-makers surveyed in the Experian research ranked accelerating digitisation strategies and broader online channel adoption as priorities
TransUnion s latest Consumer Financial Hardship surveys found that digital Covid-19-related fraud schemes targeting local consumers increased 17 percentage points between April and October 2020 42% of respondents reported being targeted. However, while businesses must protect their customers and themselves, technological solutions should not create friction within the customer experience or create barriers to entry.
Despite consumer demand for a smooth user experience on digital channels, traditional fraud
Lenders keep taps open
detection and prevention solutions tend to negatively impact that experience, says Keith Wardell, director for product at TransUnion Africa. Finding the balance requires a digital onboarding process that delivers a friction-right experience, while increasing conversions and loyalty, reducing fraud and improving operational efficiencies.” Technology will also play a pivotal role in rebuilding SAs credit-active consumer market. For example, consumers who don t have an established credit history often don t qualify for credit. TransUnion estimates nearly 26% of South African adults cannot access credit because they have never built a credit history by
maintaining the ability to grow their books responsibly, says TransUnion Africa s CreditVision Product Manager Christelle Rall.
The Covid-19 crisis requires lenders to reconsider how they assess credit risk. Including nontraditional variables, new policies and alternative data will support their risk assessment processes and enrich decisions across the entire credit life cycle says Jaco van Jaarsveldt, Chief Decision Analytics Officer at Experian Africa.
“Ultimately, this data-centric
