New TransUnion study finds most new-to-credit consumers in the Dominican Republic get credit on their first application and are satisfied with the amount received

• Consumers of every generation access credit for the first time each year.

Santo Domingo, Dominican Republic, June 2023. — In the Dominican Republic and around the world, new-to-credit consumers – those in the early stages of their credit journey – generally gain access to credit on their first application and are satisfied with the amount received. However, most anticipate life events or expenses in the near future for which they say access to additional credit will be key. These are among the findings of the recently published global study by TransUnion (NYSE: TRU), “Expanding Access to Credit: A Deeper Look at New-to-Credit Consumers“.

The study gives lenders in both developed and developing credit markets insights into how to address the credit needs of new-to-credit consumers and what these consumers value most in their credit providers.

The global study included credit data and findings on millions of consumers across a range of global markets, including Canada, Colombia, Hong Kong, India, the United States and South Africa, as well as the results of a global online survey of consumers in the Dominican Republic, Brazil, Canada, Colombia, India, the Philippines, the United States and South Africa.

TransUnion defined a new-to-credit consumer (NTC) as someone with no traditional credit history at credit bureaus who opens their first traditional credit product, such as a vehicle loan, credit card or other country-specific credit. The part of the study focused on credit data examined the behaviour and performance of these new-to-credit consumers during the two years after they opened their first credit product. The global online survey gathered these consumers’ perceptions about credit.

“Credit inclusion – that is, consumers’ ability to access traditional credit products such as credit cards, home loans and personal loans – is a particularly important aspect of financial inclusion. These products serve as a means of financial mobility for consumers and can be a gateway to a better quality of life, enabling home ownership, business formation and wealth creation,” said Charlie Wise, co-author of the study and head of global research at TransUnion.

“The more consumers who can participate in a country’s credit markets, the greater the opportunities for broad economic inclusion. Our study data shows that new-to-credit consumers are often good risks, with growing credit needs, and will show loyalty to the financial institutions that offer them their first credit products,” he added.

In the Dominican Republic, 205,000 consumers opened their first credit product and became NTC in 2022, and another 49,000 became NTC in the first 3 months of 2023. In 2022, Generation Z made up the largest share of this group at 56%, followed by Millennials (29%), Generation X (11%) and Baby Boomers (4%). The credit card was the most common first product opened in the Dominican Republic in 2022, chosen by 63% of NTC consumers, followed by personal loans, chosen as the first product by 33% of NTC consumers.

Better understanding NTC consumer trends

TransUnion also conducted survey-based market research to understand the perspective of NTC consumers, including responses from 8,465 NTC consumers in multiple markets, to better understand the perceptions, attitudes and experiences of NTC consumers regarding credit that may be influencing their needs and behaviours.

The survey results revealed that new expenses were the main reason for opening a first credit product in almost every market, including the Dominican Republic. The exceptions were the United States and Canada, where the main motivation was having a convenient way to spend. Payment convenience was the second most cited factor in the Dominican Republic. This is in line with the choice of first product opened: in the Dominican Republic, as in the United States and Canada, the most commonly opened first product is a credit card.

Most NTC consumers in all countries except India said they received a credit product from the first lender they applied to, without needing to approach several lenders. In the Dominican Republic, 57% of NTC consumers said they received a credit product from the first lender they applied to. In addition, 86% of NTC consumers surveyed said they were satisfied with the amount of credit received.

The study also revealed that convenience is a key factor for NTC consumers and can lead to more opportunities for lenders in the future. When choosing which lender to open their first product with, convenience was cited as the main criterion in all regions except Brazil. In the Dominican Republic, 34% of consumers cited convenience as the main factor, while another 22% said it was because they already had an account with the lender or because it had been recommended by friends or family.

Finally, lenders that give NTC consumers their first credit can also benefit by building customer loyalty. According to the survey results, good service was cited by respondents in the Dominican Republic as the main reason for staying with the same lender when opening future credit products. Interestingly, more effective communication emerged as the main factor for a better experience with the lender, ahead of higher credit limits and better rewards.

“Driving credit inclusion starts with better understanding the perspectives of NTC consumers and what drives them to seek more credit, as well as with education on the ways they can build and improve their credit profiles. By doing so, lenders can play a key role in helping more consumers participate actively in the credit market and promote greater credit inclusion,” said Virginia Olivella, director of research and consulting for TransUnion LATAM.

Most new-to-credit consumers are looking for new credit products

The survey results also indicated that, despite their lack of credit experience, NTC consumers understand the benefits and risks of credit and want to stay in control of their finances. On average, around six in ten NTC consumers said their need for credit would increase in the next three to five years, with the highest levels seen in developing markets (led by India at 79%). About 73% of NTC consumers in the Dominican Republic said their need for credit would increase over the same period.

However, 40% of NTC consumers in the Dominican Republic said the reason they did not take on more credit was that they did not want to go into debt. This still means that most consumers are looking to gain greater access to credit and use it for their financial needs. Concern about losing control of their finances was another reason given by 34% of these consumers for not seeking more credit. Globally, wanting to avoid debt was the most cited reason for not wanting more credit, except in India and the Philippines, where not wanting to lose control of their finances was the main reason.

Around the world, respondents said they plan to apply for credit in 2023 to varying degrees. In the Dominican Republic, 62% of NTC consumers plan to apply for credit. This significant share of consumers intending to seek credit shows there is real need for and interest in credit. Finding ways to meet the needs of this large consumer population, while managing risk prudently, represents a significant growth opportunity for lenders.

The survey results also showed that 45% of new-to-credit 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 – that created a greater need for credit. In addition, 32% of new-to-credit consumers would expand their use of credit if they received information about its availability and benefits, 29% if lower payments were possible and 25% if they had greater clarity about the total cost of credit, including fees and interest.

“New-to-credit consumers in the Dominican Republic and around the world appear to have growing credit needs, while understanding the risks of taking on too much debt,” added Olivella. “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.”

“It is clear that new-to-credit consumers around the world and in the Dominican Republic will play an important role in growing many lenders’ portfolios,” said Olivella. “Banks, credit unions and other financial institutions that use alternative data while offering products, channels and a positive onboarding process will likely be the ones that succeed in building loyalty with this segment of the population.”

For detailed information on all the markets covered in the study, click here.

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About TransUnion (NYSE: TRU)

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