Is the Point-of-Sale Trend Putting Pressure on Plastic?

Q1 2019 TransUnion Industry Insights Report explores latest consumer credit trends

CHICAGO, May 16, 2019 (GLOBE NEWSWIRE) -- The latest entrant to the credit market, point-of-sale loans, may be shaking up how consumers finance large purchases. According to the TransUnion (NYSE: TRU) Q1 2019 Industry Insights Report, this phenomenon, combined with the popularity of credit card reward programs, may be particularly taxing for the private label card category.

Point-of-sale loans provide consumers with an instant offer of credit in the form of an unsecured personal loan at checkout. During the transaction, consumers receive the payment amount and loan term, and the loan is paid back in monthly installments. Consumers who may have previously financed either small or large purchases such as clothing, furniture, electronics or home improvement projects with a private label card are opting for point-of-sale financing or leveraging their bank-issued credit cards. As a result, the private label card market—those cards provided on behalf of specific retailers—is shrinking.

Newly issued private label cards experienced a decline of 5.5% between Q4 2017 and Q4 2018, the ninth straight quarter of yearly decreases (originations are analyzed one quarter in arrears to account for reporting lag). Online shopping has contributed to a decline in the retail brick-and-mortar footprint for some years now, which is reflected in the contraction in private label originations over the past few years. The growing interest in point-of-sale loans has contributed to this trend. As of Q1 2019, 120.6 million consumers had access to a private label card, down from 126.5 million just one year earlier. Conversely, consumers with access to a bank-issued credit card increased in that same timeframe from 174.9 million to 179.5 million.

“As brick and mortar retailers continue to face challenges, many merchants are implementing point-of-sale financing alternatives as a potential new avenue for growth,” said Paul Siegfried, senior vice president and credit card business leader at TransUnion. “In addition, consumers are increasingly opting to cash in on their preferred credit card reward program rather than apply for a new private label card.”

Year-over-Year Origination Growth

Card TypeQ4 2018Q4 2017Q4 2016Q4 2015Q4 2014Q4 2013
Private Label-5.5%-6.7%-3.8%-0.1%4.1%9.2%

In Q4 2018, credit card originations grew 2.9% year-over-year, with the subprime risk tier showing the highest growth at 8.8%. In a sluggish credit card market, issuers are seeking growth by extending credit to subprime consumers, but doing so in a prudent fashion. The average credit line in Q1 2019 was $8,541, a jump from $8,042 in Q1 2010. For subprime, however, this number fell from $3,083 to $2,421 over the same time period.

“Subprime originations grew to 2.97 million in Q4 2018, yet super prime still outpaced the subprime category with 3.65 million originations. Delinquencies however, have remained well below recession-era levels, which indicates that lenders continue to keep their risk in-check as they pursue measured growth,” added Siegfried.

Q1 2019 Credit Card Trends


Credit Card Lending Metric
Q1 2019Q1 2018Q1 2017Q1 2016
 Number of Credit Cards432.8 million416.5 million 405.8 million386.4 million
Borrower-Level Delinquency Rate (90+ DPD) 1.89% 1.78% 1.69% 1.50%
Average Debt Per Borrower$5,554 $5,472 $5,332 $5,193 
Prior Quarter Originations*16.5 million16.0 million16.0 million16.7 million
Average New Account Credit Lines*$5,296$5,283$5,262$5,091

*Note: Originations are viewed one quarter in arrears to account for reporting lag.

TransUnion’s Q1 2019 Industry Insights Report features insights on consumer credit trends around personal loans, auto loans, credit cards and mortgage loans. For more information, please register for the webinar.

Growth in Personal Loans Led by Super Prime Consumers

Q1 2019 IIR Personal Loan Summary
Personal loan balances continued to climb in Q1 2019, growing 19.2% year over year to a new high of $143 billion. Over the past four years total balances have nearly doubled, growing from $72 billion in Q1 2015. Growth is occurring across all risk tiers with originations increasing 9.7% to 5.0 million in Q4 2018.  Super prime borrowers had the largest growth on the origination front with an increase of 22.5% year-over-year, compared to 19.5% over the same period last year. Subprime and near prime originations continued to grow, although at a more modest pace: 10.0% and 6.4%, respectively. Amid unprecedented growth in this category and higher average balances, the percentage of borrowers seriously delinquent (60+ DPD) is 3.47%, a record low for the first quarter.

Instant Analysis
“Personal loans remain one of the highest growth areas of consumer credit, with originations increasing 10% in the fourth quarter and balances by 19% in the first quarter.  Super prime and prime plus consumers are leading the growth in originations and balances, as consumers in general continue to use personal loans for debt consolidation and to finance home improvement.  In spite of the uncertainty created by stock market volatility and the partial government shutdown at the end of last year, job creation and wage growth remain strong, and overall borrower serious delinquency is at the lowest first-quarter rate we’ve seen in the past several years.”

  • Liz Pagel, senior vice president and consumer lending business leader at TransUnion

Q1 2019 Unsecured Personal Loan Trends


Personal Loan Metric
Q1 2019Q1 2018Q1 2017Q1 2016
 Total Balances$143 billion$120 billion$102 billion$93 billion
Number of Unsecured Personal Loans 21.4 million19.2 million16.9 million15.4 million
Number of Consumers with Unsecured Personal Loans 19.3 million17.6 million15.7 million14.7 million
 Borrower-Level Delinquency Rate (60+ DPD)3.47% 3.51%3.72%3.59%
 Average Debt Per Borrower$8,618 $7,986 $7,603 $7,544 
 Prior Quarter Originations*5.0 million4.6 million3.7 million4.1 million
Average Balance of New Unsecured Personal Loans*$5,432$5,044$5,132$5,077

*Note: Originations are viewed one quarter in arrears to account for reporting lag.

Auto Originations on the Upswing while Delinquencies Remain Flat

Q1 2019 IIR Auto Loan Summary
Auto originations grew 1.7% in Q4 2018 and have grown year-over-year in each of the past four quarters, reversing the negative trend caused by pullback in the market the second half of 2016 and full-year 2017. Super prime and subprime borrowers led this growth, with Q4 2018 year-over-year increases of 5.2% and 4.4%, respectively. Meanwhile, serious borrower delinquency rates (60+ DPD) continued to remain stable at 1.31% in the first quarter. Q1 2019 was the seventh consecutive quarter with a year-over-year delinquency variation of less than 10 basis points.

Instant Analysis
“Despite industry forecasts indicating that new vehicle sales would fall, auto originations outperformed expectations in the 4th quarter. Growth straddled both ends of the credit spectrum, primarily coming from the super prime and subprime risk tiers, while the middle segments noticed a slight decline. Combined with steady delinquencies, this growth continues to highlight the underlying health of the auto finance market.” 

  • Brian Landau, senior vice president and automotive business leader at TransUnion

Q1 2019 Auto Loan Trends


Auto Lending Metric
Q1 2019Q1 2018Q1 2017Q1 2016
Number of Auto Loans82.2 million79.7 million76.4 million72.2 million
 Borrower-Level Delinquency Rate (60+ DPD)1.31%1.32%1.30%1.16%
 Average Debt Per Borrower$18,845 $18,581 $18,386 $18,065 
Prior Quarter Originations*6.7 million6.6 million6.7 million6.7 million
Average Balance
of New Auto Loans*

*Note: Originations are viewed one quarter in arrears to account for reporting lag.

Mortgage Volumes Slow, Even as Delinquencies Hit All-Time Low

Q1 2019 IIR Mortgage Loan Summary
Serious consumer level delinquency rates (60+ DPD) have reached historic lows, dropping from 1.74% in Q1 2018 to 1.44% in Q1 2019. All of the top 20 MSAs experienced declines in year-over-year delinquencies, with New York, Boston and Philadelphia leading the pack at 26%, 26% and 23% year-over-year drops, respectively. Originations decreased 13.7% year-over-year across all risk tiers to 1.5 million in Q4 2018. Subprime originations declined the least of all risk tiers at 4.9% year over year. 

Instant Analysis
“Housing affordability continued to be a significant driver of origination decline, as home prices and interest rates continued to rise. Interestingly, subprime originations slowed less than other risk tiers, a pattern we’ve been observing since Q1 2017. Paradoxically, even as home prices have increased, we observed a decline in average new account balances. This is at least partially driven by mix shift across the 20 largest MSAs, where originations shrank in the most expensive MSAs and grew in the least expensive MSAs.”

  • Joe Mellman, senior vice president and mortgage business leader at TransUnion

Q1 2019 Mortgage Loan Trends


Mortgage Lending Metric
Q1 2019Q1 2018Q1 2017Q1 2016
 Number of Mortgage Loans53.1 million53.1 million52.8 million52.9 million
 Borrower-Level Delinquency Rate (60+ DPD)1.44%1.74%2.07%2.35%
Average Debt Per Borrower$208,057 $202,470 $196,772 $191,927 
Prior Quarter Originations*1.5 million1.8 million2.1 million1.6 million
Prior Quarter Average Balance
of New Mortgage Loans*

*Note: Originations are viewed one quarter in arrears to account for reporting lag.

“Across the consumer wallet, delinquencies have largely remained at low levels, an indication of the overall health of the consumer credit market,” said Matt Komos, vice president of research and consulting in TransUnion’s financial services business unit. “To garner more market share, we expect lenders to expand their buy box and grow their books on both ends of the credit spectrum.”

TransUnion’s Q1 2019 Industry Insights Report features insights on consumer credit trends around personal loans, auto loans, credit cards and mortgage loans. The data used to compile the analysis was obtained from TransUnion’s consumer credit database. For more information, please register for the webinar.

About TransUnion (NYSE:TRU)

Information is a powerful thing. At TransUnion, we realize that. We are dedicated to finding innovative ways information can be used to help individuals make better and smarter decisions. We help uncover unique stories, trends and insights behind each data point, using historical information as well as alternative data sources. This allows a variety of markets and businesses to better manage risk and consumers to better manage their credit, personal information and identity. Today, TransUnion has a global presence in more than 30 countries and a leading presence in several international markets across North America, Africa, Europe, Latin America and Asia. Through the power of information, TransUnion is working to build stronger economies and families and safer communities worldwide.

We call this Information for Good.SM

Contact Dave Blumberg
Telephone 312-972-6646