TransUnion publishes global study highlighting the importance of financial inclusion

• Survey reveals that credit-unserved and underserved consumers understand credit and want to stay in control of their finances.

Santo Domingo, Dominican Republic, May 2022 – TransUnion (NYSE: TRU), a global information solutions provider, has published a new global study – “Expanding Access to Credit: A Deeper Look at Credit Unserved and Underserved Consumers”. The global study included an analysis of consumer credit behaviour in Canada, Colombia, the United States, Hong Kong, India and South Africa, as well as a global online survey of more than 11,100 consumers in the Dominican Republic, Brazil, Canada, Colombia, the United States and the Philippines.

Most consumers are looking for new credit products

The global survey results indicate that, despite their lack of credit experience, credit-unserved and underserved consumers understand the benefits and risks of credit and want to stay in control of their finances.

In the Dominican Republic, a significant majority of consumers, both unserved (72%) and underserved (69%), expect their need for credit to increase over the next three to five years. However, just over half of unserved consumers (53%) and 47% of underserved consumers said the reason they did not take on more credit, or any credit in the case of unserved consumers, was that they did not want to get into debt. This still means that most consumers, particularly in the underserved group, are looking for greater access to credit and to use credit for their financial needs.

Concern about losing control of their finances was also one of the reasons given by 34% of underserved consumers for not seeking more credit. Globally, the desire to avoid debt was the most cited reason for not wanting more credit, with the exception of Canada.

Around the world, respondents said they plan to apply for credit in 2022 to varying degrees. In the Dominican Republic, 52% of unserved consumers plan to apply for credit, as do 58% of underserved consumers. This considerable proportion of both consumer groups intending to apply for credit indicates a real need and interest in credit. Finding ways to meet the needs of this large consumer population while managing risk prudently represents a major growth opportunity for lenders.

Consumers want more credit education and better credit offers

The survey results also indicated that 45% of underserved consumers in the Dominican Republic would expand their use of credit if they had a significant life event in the future – such as getting married or having a child – which would create a greater need for credit. In addition, 29% of underserved consumers would expand their use of credit if they received information about its availability and benefits, 26% if lower payments were possible and 21% if they were clearer about the total cost of credit, including fees and interest.

The most common reason for both unserved and underserved consumers in the Dominican Republic to reject credit offers they received was that they no longer needed the credit, unlike other countries, where an interest rate that was too high was the most common reason for both groups. An interest rate that was too high was the second most common reason for rejecting a credit offer among unserved and underserved consumers in the Dominican Republic, cited by 24% and 19% of respondents respectively.

Consumer experience and the offers received also influenced why unserved and underserved consumers rejected a credit offer. 10% of underserved consumers in the Dominican Republic cited a long approval process as the reason for rejecting the credit offer, and 11% of underserved consumers cited being offered an insufficient amount. In addition, 10% of underserved consumers said they rejected credit offers because they received a better offer elsewhere.

The survey also showed that most underserved consumers (55%) in the Dominican Republic had used alternative sources of financing outside traditional credit products to meet their financial needs in the past year, with loans from family and friends the most common source. Only 37% of unserved consumers said they had used alternative sources of financing in the past year, and among those who did, loans from family and friends were also the most used. Covering a shortfall in income was the most common reason for both unserved (48%) and underserved (52%) consumers to borrow from family and friends.

“Credit-unserved and underserved consumers in the Dominican Republic and around the world appear to be quite knowledgeable about credit and understand the risks of taking on too much debt,” said Virginia Olivella, TransUnion’s director of research and consulting for Latin America. “Many of these consumers want to learn more about the benefits of credit and expect affordable interest rates and monthly payments, along with clarity about the total cost of credit. Long approval processes or other negative experiences can lead a consumer to reject a credit offer. Since the cost of credit can often be a barrier to bringing more consumers into the credit ecosystem, it is important for financial institutions to develop and offer credit products that respond to these concerns. In addition, a seamless consumer experience is a key consideration for lenders when reaching unserved and underserved consumers.”

Unserved and underserved consumers show different levels of satisfaction with credit

When comparing the sentiment of unserved consumers with that of underserved consumers, there tends to be a marked difference in their level of satisfaction with their current amount of credit. In the Dominican Republic, 45% of underserved consumers were satisfied or extremely satisfied with their current credit, while only 26% of consumers without traditional credit products had the same level of satisfaction. In addition, 13% of unserved consumers were not at all satisfied with their level of credit, compared with 10% of underserved consumers.

“Driving financial inclusion starts with better understanding the different nuances between unserved, underserved and well-served populations, and what motivates them. For example, the reasons that lead unserved consumers to apply for credit and the reasons underserved consumers may need an additional credit product can vary widely. Lenders can use this information to better meet the unique needs of these consumer segments and educate them on how they can build and improve their credit profiles. In doing so, lenders can play a fundamental role in helping more consumers actively participate in the credit system and promote greater financial inclusion,” concluded Olivella.

For more information about TransUnion’s global study, “Expanding Access to Credit: A Deeper Look at Credit Unserved and Underserved Consumers”, download the report here.

 

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About TransUnion (NYSE: TRU)

TransUnion is a global information and insights company that makes trust possible in the modern economy. We do this by providing a comprehensive picture of each person so they can be reliably and safely represented in the marketplace. As a result, businesses and consumers can transact with confidence and achieve great things. We call this Information for Good.

With a leading presence in more than 30 countries across five continents, TransUnion provides solutions that help create economic opportunity, great experiences and personal empowerment for hundreds of millions of people. www.transunion.do

Credit-unserved consumers: Consumers who do not have and have never had a traditional credit product, according to the consumer credit database of TransUnion. To size the unserved population, we start with the total adult population according to the United Nations. We then subtract underserved consumers, those new to credit and those active or established in credit. The remaining number is the unserved consumers.

Credit-underserved consumers: Consumers with some, but limited, credit presence. Specifically, consumers who:

• Have had some credit activity in the credit market for at least the last 2 years
• Currently have 0-2 traditional credit accounts open
• Have only had one type of credit

TransUnion’s global online survey included responses from 11,128 adults and was conducted between 3 August 2021 and 5 January 2022 by TransUnion in partnership with third-party research provider Qualtrics® Research Services.

 

 

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