Increasingly Optimistic Consumers Are Taking a Proactive, Long-Term Approach to Their Financial Health

Information and insights company TransUnion, has published its Consumer Pulse Study for Q1 2024 showing a growing positivity among South African consumers, with 72% saying they are optimistic about their finances over the next 12 months – the highest percentage ever measured for this category since the study started tracking this in Q4 2020. The survey also showed more than three quarters (76%) are expecting a salary increase during 2024.

Almost two-thirds (65%) of the households that participated in the survey are confident that they will be able to meet their current bills and loan obligations in the coming three months. The percentage of households that expect to struggle to pay their bills and loans (35%) is seven percentage points lower than in Q4 (42%) and, of these, 34% plan to pay a partial amount that they can afford, 33% plan to take on partial or gig work and 30% plan to use money from savings to help meet their financial responsibilities. Lenders can also expect requests from 12% of this group of borrowers to refinance or renegotiate their current debt payment periods and/or interest rates.

Lee Naik, CEO of TransUnion Africa, says that the households surveyed for this quarter’s study are taking a proactive long-term approach to their financial health. “In addition to a feeling of overall buoyancy, the results show that consumers are responding responsibly to the prevailing macroeconomic factors by prioritising the repayment of existing debt and saving more for both the short- and long-term.”

In all, 37% of respondents who said that the South African economy is in a recession are committed to paying down debt faster, compared to 29% in Q4, and 51% (up from 47% in Q4) are cutting back on discretionary spending to be able to do so. When it comes to savings, 19% of respondents put more into their retirement funding in the past three months, and 28% saved more in an emergency fund or stokvel. These numbers are higher than in Q4 2023, when 18% boosted their retirement funds and 25% put money into savings and stokvels.

Naik also says that consumers’ appetite for new credit facilities is “the highest we’ve seen it since Q4 2020”. A full 38% of respondents plan to apply for new credit or refinance existing credit such as property and car finance, credit cards, and personal and student loans, within the next year.

Further, there is a shift towards looking past the current environment to the long-term, which will be welcomed by the residential property sector, with 21% of respondents planning to apply for a new bond facility.

Credit sentiment

While 56% of South Africans say that they think access to credit and lending products is a ‘very’ or ‘extremely’ important enabler for achieving financial goals, the findings show numerous perceived barriers to access. Of the respondents who considered applying for new credit or refinancing existing credit during the quarter but then decided not to (51%), more than a third (35%) said that the cost of this credit is too high.

Other respondents (15%) were put off by the ‘work’ it would take to answer the underwriting questions, and 10% could not verify their personal information. Another 27% believed that their application would be rejected due to their income or employment status, while 23% felt that their credit history would count against them. When asked whether they believed their credit scores would change if businesses were to leverage information that is not on a standard credit report, like rental payments for accommodation, gym memberships, and ‘buy now pay later’ transactions, 49% agreed.

“These findings present opportunities for lenders to refine their requirements, and to streamline their application processes, as well as to partner with credit bureaus and exchange data in order to offer credit to a larger sector of responsible borrowers,” says Naik.

Digital fraud

With 20% of households having added to their home-based digital services over the preceding quarter, transacting digitally is becoming even more commonplace. However, an alarming number (60%) of South Africans were targeted by an online, email, phone call or text messaging fraud scheme, with 9% falling victim over the same period. Findings show that 34% of consumers were exposed to a money or gift card scam, and 33%, 31% and 27% respectively reporting phishing, smishing and vishing scams (fraudulent emails, websites, social posts, and QR codes; text messages; and phone calls) aimed at tricking them into revealing their personal data. One in ten (10%) reported being targeted by identity theft scams for their personal information, and more than a quarter (27%) encountered third-party seller scams on legitimate online retail websites.

These numbers show how important it is for consumers to monitor their credit records regularly. Early detection of fraudulent activities that affect their credit scores enables consumers to take timely corrective action. The overwhelming majority of surveyed households (93%) realise the importance of checking their credit records regularly, and by far the biggest portion (52%) do so at least monthly.

Consumers can get their free annual credit report from TransUnion here.