In the bustling financial hub of Hong Kong, a significant shift is underway in the credit landscape. Younger generations, particularly Millennials and Gen Z, are reshaping borrowing trends with a notable surge in revolving credit usage. According to recent data, the number of new revolving credit users has skyrocketed by 76.4% year-over-year (YoY), driven largely by digital banks that offer faster approvals and lower credit limits. This trend reflects both the changing preferences of younger consumers and the strategic adjustments made by lenders to cater to this demographic.

Rising Influence of Digital Banks and Young Borrowers

In the vibrant autumn of 2024, a comprehensive report from TransUnion highlighted the transformative role of younger consumers in Hong Kong's credit market. The three months leading up to November saw Millennials comprising 40% of new revolving credit users, while Gen Z's participation more than doubled, increasing by an impressive 127.8% YoY. This remarkable growth can be attributed to the rise of digital banks, which accounted for 66% of all new credit lines. These institutions have attracted young borrowers with streamlined approval processes and tailored credit products.

Despite a cautious lending environment, where the average new account credit line dropped by 32.8% YoY due to risk management strategies, the overall number of revolving credit accounts grew by 6.2% YoY. Interestingly, personal loan originations declined by 4.6% YoY, but Gen Z defied this trend with a 10.3% increase in personal loans. Although outstanding balances decreased by 5.1%, the steady demand for revolving credit indicates robust consumer confidence.

Furthermore, delinquency rates on revolving credit lines increased slightly to 0.7%, signaling growing balances among younger consumers. Meanwhile, existing cardholders boosted spending, resulting in a 1.4% rise in outstanding balances by November 2024. Notably, Gen Z accounted for 21.4% of new credit card issuances, up from 17.4% YoY, as they began building their credit profiles.

Hong Kong's influx of 180,000 new talents in 2024 under various admission schemes presents a golden opportunity for lenders. Targeting these high-earning professionals, especially in finance and technology, could expand credit portfolios while maintaining low-risk profiles. Analysts emphasize that leveraging data-driven lending strategies will be pivotal in identifying creditworthy applicants and managing potential delinquency risks.

From a journalist's perspective, this transformation in the credit market underscores the importance of adapting to changing consumer behaviors. As younger generations increasingly rely on digital platforms for financial services, lenders must innovate to meet their needs while ensuring sustainable growth. The rise of digital banks and the growing influence of Gen Z highlight the evolving dynamics of credit markets, offering valuable insights for future financial strategies.