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COVID-19 playbook to help SA’s battered consumer credit market

07 April 2020 TransUnion

COVID-19 is the number one threat to South Africa’s growth and job security – and the local consumer credit market will have to take a data-driven approach to drive a proactive response to the crisis if it is to survive.

That was the key message from global data and insights company TransUnion this week, as it launched its COVID-19 playbook to a wide audience of business and credit industry players from across South Africa. The playbook is an insights-driven methodology designed to help the credit market navigate a consumer marketplace that will be heavily impacted by the COVID-19 pandemic, and includes several market scenarios and forecasts for the industry to consider.

Speaking at the launch, via webinar, Carmen Williams, director of research and consulting for TransUnion South Africa, said the model showed a range of possible outcomes for the consumer credit market across multiple sectors and products, based on best-case, mid- and worst-case scenarios.

“South Africa was already in a technical recession before the COVID-19 pandemic hit the country and so was already starting from a fragile position. What will define the COVID-19 pandemic for the consumer credit market is how banks and lenders respond to the challenges it presents,” said Williams.

“Credit will be an important source of liquidity for struggling consumers, and having the right models in place to predict and manage potential outcomes is what will set successful organisations apart. We know lenders want to help the consumers they serve, but they need to do it based on well-informed and robust models and analysis. Lenders also need to understand that macroeconomic and credit industry data will be highly dynamic over the coming weeks and months, and that they will need to monitor and update their models on an ongoing basis to reflect changing conditions and scenarios.”

Williams said COVID-19 will weigh heavily on the South African consumer credit landscape. TransUnion’s Q4 2019 South Africa Industry Insights Report indicated that South African consumers were already taking on more debt to survive, with credit card balances up 17.9% year-on-year (YoY) and non-bank personal loans up 31.6% over the same period, and defaulting on their loans at higher levels. This is seen in the increase in delinquency rates across four of the five major consumer lending categories in the industry insights report for Q4 2019, and an increase in YoY shifts in number of outstanding balances across all five. This trend will only be exacerbated by the COVID-19 crisis, and banks and retailers will have to shift their strategies to cope.

“In South Africa, we have seen an inverse relationship between consumer debt balances and GDP growth. As GDP has contracted, consumers have sought credit at higher levels in order to help make ends meet. This is evident in the growth of consumption credit balances, particularly credit cards and personal loans which provide access to cash, while housing and vehicle loan growth has been far more muted. In tough times, consumers take on more debt to survive. We expect the demand for credit will increase as consumers struggle through the current crisis. It will be critical that lenders continue to extend new credit to consumers who need it, while at the same time maintaining sound risk management practices to protect their own balance sheets. This balance requires that lenders have a comprehensive playbook and up-to-date data to guide their strategies,” said Williams.

The telecommunications and insurance industries are already struggling, and will need to adapt to the new COVID-19 reality we are now in, she said. In the telecoms sector, new account growth in the post-paid market fell 37% year-on-year in 2019. As a result, telcos shifted their risk strategy and took on more subprime clients, where demand was higher. This shift in strategy, coupled with tough economic conditions resulted in an increase in delinquency rates.

The playbook combines key macroeconomic indicators, historical trends and insights garnered from past global crises such as inter-alia Hurricane Katrina and Hong Kong’s handling of the SARS and COVID-19 crises to generate multiple data-driven market scenarios and forecasts, and provide treatment strategies for each scenario to mitigate risk.

TransUnion’s initial COVID-19 playbook includes all key lending and credit-related product types across the banking, retail, telco and insurance industries. SMMES, businesses and financial institutions interested in learning more about the COVID-19 playbook, links to the launch webinar and further contact information can be found on here.

COVID-playbook here...


Quick Polls


The intention with lockdown was to delay or flatten the Covid-19 infection curve and give both the private and public healthcare sectors time to prepare for the inevitable onslaught. Did the strategy work?


No, the true numbers are not reflected. Almost a quarter of South Africans may already have been infected with Covid-19
It’s too soon to tell. We will likely get a second wave with stringent lockdown regulations in place again
Yes, South Africa bought enough time to make a significant difference. We saved lives and have passed our peak. The worst is over
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