The present lending and credit landscape is complicated by a “dual” economy, with some consumers on one hand thriving while others on the other hand continue struggle with finances, according to Experian’s 2021 Global Decisioning Report.
The report is based on a survey of about 9,000 consumers and 2,700 businesses from around the globe, including India, Japan, Singapore and Australia in the Asia-Pacific region.
Almost half (46%) of APAC consumers surveyed say they have cut back spending, compared to 21% of higher income households that increased spending.
Also, 32% of APAC consumers say their household income has declined since COVID-19, while 23% of those from the highest-earning brackets report discretionary income increases since the start of the pandemic due to having fewer areas to spend such as dining out or going on holidays.
Findings show that banks and financial institutions across the region have seen a 74% increase in loan applications.
This increase in conjunction with the changing credit landscape has led to 63% of APAC businesses expressing concern about their customers’ credit worthiness, with broader economic uncertainties impacting customer behaviour.
To address these concerns, 70% of APAC businesses surveyed reported already having a plan in place to manage defaulting customers.
Also, there is a shift in digital expectations, with only a third of APAC consumers surveyed willing to wait up to 30 seconds before abandoning an online transaction.
Findings show that 91% of businesses had a strategy in place pertaining to their digital channels and customer journey and 54% say that they have implemented this since the start of the pandemic.
Further, the report identifies three things lenders should do to navigate the complexity of the current lending and credit landscape.
First, leverage data and advanced analytics to ensure that lenders have a comprehensive understanding of the risk and opportunity of their portfolio as well as visibility into changes to customer profiles.
Second, proactively engage customers, like offering new credit and other products to support those that have recovered and are ready to engage.
And third, prepare for a potential wave of delinquency as payment holidays come to an end. Lenders should make it easy for customers that are still struggling and offer online support and flexible terms to help solve their problems.
“To cater to this duality, banks and financial institutions are adjusting their priorities, with at least a fifth of them increasing digital acquisition and digital engagement, automating and managing customer decisions, and making efforts to better understand their customer base,” said Ben Elliott, Experian’s CEO in Asia Pacific.
“Prioritising technology-driven solutions – in particular, data and analytics – will be key for businesses and lenders to respond effectively to this dual economy and remain relevant in the face of new challenges,” said Elliott.