Tag: credit cards

What South Africans owe on their credit cards

Source: Supermarket & Retailer

The findings of TransUnion’s Q2 2021 South Africa Industry Insights Report covers a period where unemployment was still rising, but prior to July’s civil unrest and peak in the third wave of Covid-19 cases.

The report shows that a number of the trends, seen immediately after the outbreak of Covid-19 more than a year ago, have continued to advance with some notable exceptions, especially when looking at delinquencies.

Understanding the delinquency picture

Delinquency rates during the pandemic have been influenced by a number of important factors, the credit specialist said. Deferrals, payment holidays and other accommodations by lenders have helped borrowers in need. A decline in new borrowing in the past year since the onset of the pandemic has also shifted the overall ratio of good versus bad debt within lenders’ portfolios.

While a general increase in overall debt has been apparent, the total number of new loans and accounts has decreased as a result of the decline in originations. This means that while the numerator in the delinquency equation (i.e., existing accounts with delinquencies) is rising, the denominator is not growing at the same pace, said TransUnion.

Add in other drivers for which accounts financially distressed consumers choose to repay – e.g., prioritising product utility such as credit card functionality for online payments or car loan payments to ensure you can avoid public transport- and it’s clear that there are often multiple drivers for changes in delinquency levels, the group said.

Typically, delinquencies have often followed wider macroeconomic trends such as GDP growth and changes in unemployment.

In the latest Q2 2021 figures, although there were improvements in most of the major consumer credit categories, unsecured personal loans recorded a significant increase in balance-level delinquencies – bank personal loans were up 260 bps YoY and non-bank personal loans 700 bps.

A higher delinquency rate for non-bank personal loan providers is to be expected as they have historically targeted higher-risk consumers who are more likely to default and will be less resilient to sustained financial hardships, such as those caused by the pandemic.

“Finding and funding resilient consumers becomes even more crucial during challenging economic periods when looking to maintain a healthy portfolio delinquency ratio.

“The key is to fuel new credit growth by finding good consumers, who are likely to perform within lenders’ target thresholds and in return can help maintain a healthy bad-to-good ratio for longer-term lending growth,” said Carmen Williams, director of research and consulting at TransUnion South Africa.

Credit demand in a post-pandemic world

Throughout the pandemic, TransUnion’s data has shown reduced appetite from both consumers (demand) and lenders (supply) for new account openings (as measured by originations), and this continued in Q2 2021.

“However, with the world economy slowly starting to reopen and vaccination programs gaining pace, the future shape of the consumer credit market will depend on a number of important variables,” it said.

Historically, macroeconomic conditions have been an important factor in the pace of credit growth. Equally, consumer sentiment also has a significant bearing. Although the latest IIR data is for Q2 2021, TransUnion also conducted its regular Consumer Pulse Study in August 2021, which was post the civil unrest and the initial peak of wave three Covid-19 infections seen in early July.

This study showed a number of important trends relevant to potential future demand and direction of the market in South Africa, the credit specialist said.

The number of South African consumers anticipating in August that they would apply for new credit or refinance existing credit within the next year was just under a third (31%). Personal loans (43%) and new credit card (35%) applications continued to be top of the list, said TransUnion.

“There continues to be significant turbulence in the South African consumer credit market, with a number of potential new trends emerging, especially in the delinquencies space. Wider economic and political news continues to impact consumer sentiment and outlook, and these will shape the recovery as it continues to emerge,” said Williams.

“Lenders need to constantly monitor for shifts in consumer behaviours and adapt to the changing demand and future preferences of consumers if they are to succeed. There is no doubt the road to recovery will be a bumpy one, but by being informed, lenders will have the best possible chance to compete and succeed.”

Credit card is the only credit product to show high levels of continued origination decline since the beginning of the pandemic (down 23% YoY in Q2 2020, 63.2% YoY in Q3 2020 and 48.6% YoY in Q4 2020 and 42.7% YoY in Q1 2021). This is largely due to lenders implementing tightened credit-granting policies in the midst of economic uncertainty, said the credit specialist.

Lenders remain focused on extending credit to existing customers rather than onboarding new borrowers. Average balances increased by 17.6% and total credit limits increased substantially by 15.2% while new loan amounts increased by only 2.2%.

Outstanding balances for credit cards (up 10.6% YoY) have been driven by consumers’ need to balance household budgets, maintain liquidity, and finance subsistence purchases, especially where incomes have been negatively impacted. However, increases weren’t evenly distributed, and a clear generational divide has emerged.

Younger consumers increased their outstanding credit card balances more than older generations. The Q2 2021 YoY change for Millennials (born 1980-1994) was 9%, compared to 6% for Gen X (1965-1979) and only 3% for Baby Boomers (born 1946-1964).

Younger generations tend to transact more online, and the utility a credit card provides is fundamental to this activity. Credit card account-level delinquencies were down 50 basis points (bps) from their peak in Q2 2020, and in Q2 2021 stood at 12.3%, and were at the same level as Q2 2019.

This improvement provides further evidence that credit cardholders are protective of and value the revolving functionality that this product holds, TransUnion said.

Source: Supermarket & Retailer

South Africans are truly struggling financially and are prioritising their monthly debt repayments as they battle to make ends meet.

This is according to Debt Rescue CEO, Neil Roets, who said that consumers typically prioritise debt repayments for their homes and cars as these are assets that they do not want to lose to repossession.

However, these repayments also usually have the highest instalment amounts, so keeping them up to date just adds to the financial burdens embattled consumers are already facing, he said.

Roets added that consumers are cutting down on a number of purchases to keep up on their expenses.

“We have seen a lot of belt-tightening happening over the past year, so consumers have started cutting down on many expenses,” he said.

“Most luxury expenses have been foregone, and purchases such as dining out and takeouts are no longer part of budgets, to keep up with debt repayments and put food on the table.

Consumers typically prioritise debt repayments for their homes and cars as these are assets that they do not want to lose to repossession.

However, these repayments also usually have the highest instalment amounts, so keeping them up to date just adds to the financial burdens embattled consumers are already facing, he said.

Roets added that consumers are cutting down on a number of purchases to keep up on their expenses.

“We have seen a lot of belt-tightening happening over the past year, so consumers have started cutting down on many expenses,” he said.

“Most luxury expenses have been foregone, and purchases such as dining out and takeouts are no longer part of budgets, to keep up with debt repayments and put food on the table.

“Many consumers are resorting to credit in the form of store cards, credit cards or payday loans to put food on the table.”

Roets said this was of great concern as it shows that South Africans are taking on debt to cover day-to-day expenses.

“Day-to-day expenses that consumers are taking debt for includes food, clothing, electricity and fuel for transport,” he said.

“But there are cases where people are taking up debt to repay other debt, or a new payday loan shortly after the previous one was repaid, placing them in an even larger debt spiral.”

The South African Post Office (SAPO) is now able to accept debit and credit cards as a payment method for the renewal of motor vehicle licences at all its branches that offer the service.

The service is available at selected post offices in all provinces except Mpumalanga and the Western Cape. The list of branches where the service is available can be checked here.

The renewal of motor vehicle licences is the most popular transaction at Post Office branches – clear evidence of the success of this service.

If you did not receive a renewal notice, the renewal form (ALV) can also be downloaded here.

Motorists who have received a traffic fine issued in terms of the AARTO Act may pay the traffic fine at any Post Office countrywide.

FNB offers “tap and PIN” ATM transactions

Source: The Citizen

FNB has become the first bank in South Africa to offer consumers an innovation that allows them to tap bank cards and enter a personal identification number (PIN) to perform a transaction without inserting the cards into automated teller machines (ATMs).

The bank estimates that the “Tap and PIN” function will reduce the time it takes to make a withdrawal by up to 20 seconds and protect its customers against card skimming devices. The functionality is currently available across 100 FNB ATMs and the bank said more would be upgraded during 2019.

The new product is a major step in the bank’s plans to continuously improve the convenience and safety of its banking ecosystem, said FNB Retail chief executive Raj Makanjee.

“In the last three years, consumers have processed approximately R1 billion worth of contactless payments from 5 million transactions on FNB issued credit and debit cards alone,” Makanjee said.

“The frequency of use by consumers has grown by between 100% and 300% on our credit and debit cards respectively, highlighting the confidence of our customers in adopting new and secure payment methods. Having started issuing contactless cards three years ago, we now have over 8.5 million contactless-enabled debit and credit cards in the hands of consumers.”

Makanjee said contactless payments offered substantial benefits in an era where consumers and retailers wanted to avoid long queues.

Top tricks used by card fraudsters in SA

By Timothy Rangongo for Business Insider SA 
Source: South African Banking Risk Information Centre

The South African Banking Risk Information Centre (Sabric) has released its card fraud statistics for 2017.

South Africa’s banking industry was hit with a 1% increase in credit card fraud in 2017, which rose to R436.7 million, according to the latest report on card fraud.

Debit cards were the least hit by fraud, which declined by 8.5% to R342.2 million in the same period.

CEO of SABRIC, Kalyani Pillay, attributes the decrease in debit card fraud to a reduction in lost and/or stolen and counterfeit card fraud.
“Criminals are always adjusting their tactics to take advantage of innovations in the banking landscape.”

Sabric lists these as the trending types of fraud in South Africa:

Lost and/or stolen card fraud
In many cases lost and/or stolen cards are obtained by interfering with customers while transacting at an ATM; criminals distract victims by offering them assistance during which the card and PIN are obtained.
The card is then used repeatedly at ATMs until the daily cash withdrawal limit on the card is reached, after which high value transactions are made at merchants.

Not-received issued-card fraud
Here, criminals intercept a genuinely-issued card before it reaches the customer.

False-application card fraud
Accounts are opened by falsifying a credit applications.

Counterfeit card fraud
Counterfeit cards are made using information stolen from the magnetic strip of a genuine card, usually through card skimming.

Card-skimming via Point of Sale (POS) devices
The first POS skimming devices were retrieved in South Africa in 2014, according to Sabric. Criminals steal legitimate POS devices from merchants and then convert them into skimming devices. In some instances, devices are swapped between different merchants to make it seem as if all devices are accounted for.

Account-takeover card fraud
The common denominator for both account-takeover fraud and false-application fraud is access to the personal information of victims. Takeovers are done by obtaining personal or client-specific information, pretending to be the client and then applying for a replacement card.

Card not present card fraud (CNP)
These transactions are done via telephone or internet. Criminals source card data in various ways such as phishing, vishing, malware, and data breaches.

How you can protect yourself against card fraud:

  • Don’t disclose personal information such as passwords and PINs when asked to do so by anyone via telephone, fax, or even email
  • Don’t write down PINs and passwords, and avoid obvious choices like birth dates and first names
  • Don’t use any Personal Identifiable Information (PII) as a password, user ID, or personal identification number (PIN)
  • Don’t use internet cafes or unsecured terminals (hotels, conference centres etc.) to do your banking
  • Review your account statements on a timely basis and query disputed transactions with your bank immediately
  • When shopping online, only place orders with your card on secure websites
  • Do not send e-mails that quote your card number and expiry date
  • Ensure that you get your own card back after every purchase
  • Report lost and stolen cards immediately
  • If you have a debit, cheque and credit card, don’t choose the same PIN for all of them. If you lose one, the others will still be safe
  • While transacting always keep an eye on the ATM card slot to ensure that your card is not taken out, skimmed, and replaced without your knowledge
  • Should your card be retained by an ATM, contact your bank and block your card before you leave the ATM
  • Subscribe to your bank’s SMS notification services to inform you of any transactional activity on your account

 

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My Office News Ⓒ 2017 - Designed by A Collective


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