The COVID-19 pandemic is significantly changing the landscape of the consumer credit market as consumers tend to tighten their budget and pay more attention to healthcare, environment and lifestyle as well as switching to online shopping.
According to Can Van Luc, a member of the National Financial and Monetary Advisory Council, financial companies will reshape their business strategies after the pandemic, depending on changes in consumers’ habits and behaviour.
Specifically, consumers tend to tighten their budget and pay more attention to healthcare, environment and healthy lifestyles. Digital technologies, e-commerce and online shopping are becoming popular in the operation of enterprises and consumption of residents.
“Consumer lending is gradually shifting from traditional methods to using technologies like consumer data, online marketing, online verification through big data, artificial intelligence and direct disbursement to customers’ accounts and electronic wallets,” he said.
A survey by FiinGroup found that the pandemic caused a decline of 25 percent of the world’s consumer market in 2020, pushing up bad debts by 100 percent and profits down by nearly 200 percent.
Market research company Ipsos found that about 80 percent of surveyed Vietnamese said that their incomes were negatively affected by the COVID-19 pandemic, with 41 percent seeing a drop of more than 20 percent. The pandemic also urged consumers to limit using cash and switch to electronic wallets and online payments.
The COVID-19 pandemic is also changing the landscape of the consumer finance market which urges financial companies to move towards consumer trends of cashless payment.
Nguyen Thanh Phuc, deputy director geneeral of FE Credit, said that as the pandemic was under control in Vietnam, the borrowing demand was predicted to increase. However, the ability to repay was assessed to be lower due to the impact of the pandemic on incomes.
Phuc said that financial companies must be very cautious in evaluating customers.
He is also optimistic about the potential of the consumer market of Vietnam in the long term, given the country’s anticipated economic growth.
Vietnam was becoming an attractive destination for production in the global shift, opening job opportunities which would help improve incomes and promote consumer demand, he said.
Phuc expected Vietnam’s consumer finance market would post stronger growth than other countries in the region with a population of nearly 100 million, 60 percent of whom had low and medium incomes.
Luc said that the consumer finance market had large development potential with economic growth anticipated at 6.5-7 percent per year in 2021-30 period and income growth at around six percent per year by 2020.
The Government also aims to promote the healthy development of the consumer finance market to prevent black credit.
He urged financial companies to diversify products to meet demand.
The outstanding consumer credit was estimated to total 1.8 quadrillion VND at the end of 2020, accounting for around 20 percent of the total outstanding loans in the economy and 2.5 times higher than 2012.
Source: Vietnam News Agency