‘Only 6% of Gen Z consumers credit active, two-wheelers on top of loan list’

The percentage of the Indian population that was classified as Gen Z — ranging from age 0-24 as of CY 2019 — was 44 per cent, representing more than 609 million people.

The majority (80 per cent) of Indian Gen Z consumers who are credit-active only have one open credit product. The most commonly held products are two-wheeler loans (21 per cent, or 1.26 million), consumer durables loans (13 per cent), and credit cards (11 per cent), it said.

The percentage of credit-active consumers with two-wheeler loans is higher among Gen Z consumers than any other generation. “In comparison, the percentage of credit-active Millennials (consumers born between 1980 and 1994) with two-wheeler loans is less than half that of Gen Z at just 10 per cent, and for Gen X (consumers born between 1965 and 1979) the figure is even smaller at 6 per cent,” Cibil study said.

“The popularity of two-wheeler loans among Gen Z consumers in India is a reflection of where this generation is in its career earnings and wider credit journey. For most, they are unable to afford a car, and having a motorbike or scooter is a convenient and often necessary way to get to work,” said Abhay Kelkar, vice president of research and consulting for TransUnion CIBIL.

Consumer durables loans are usually used by the broader population to finance large ticket purchases. However, as the second most popular consumer credit product among Gen Z consumers, they are most likely to be used to buy a smartphone, personal computer or laptop, or even a television, rather than household appliances like refrigerators or washing machines often preferred by older generations.

For Gen Z, credit card participation is growing, but remains low compared to the wider national average. For Indian Gen Z consumers, originations — the rate at which new accounts are being opened — are growing fastest in the consumption lending categories. Looking at year-over-year growth in originations in CY 2019, credit cards grew 150 per cent, consumer durables 113 per cent and personal loans 95 per cent. In the personal loans space especially, the prevalence of NBFCs and the rapid growth of fintech lenders has accelerated the availability and ease of application for this particular credit product, it said.

As per the study, there is a large divide in how Gen Z approaches credit in emerging markets versus established credit markets. While in most established markets more than half of Gen Z are already credit active, the percentages drop precipitously for EMs.

“In EMs, lenders may be more conservative with extending traditional credit products to Gen Z, as those consumers may not yet have the credit histories and track records those lenders use to assess and manage risk,” said Kelkar.