Consumer credit situation in Europe: Are there any changes in the last few years?
Nov 18, 2021
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The banking system in a short historical period from 2005 to 2010 experienced a magnificent rise and a global financial crisis, and many people could not have thought how it would have ended. In the same way, not everyone realized that consumer lending, which banks would undertake to develop, would become the locomotive of the banking industry, and the consumer boom would radically change the lives of Europeans. In the modern economy, the volume of lending to the population is increasing every year. And due to this fact, the list of loan merchandise provided by lending companies and banks to individuals is expanding. Tough competition in the retail lending market forces banks to look for ways to improve lending performance and ensure its effectiveness on the population.
According to the recent studies done by Swedish specialists from smslansnabb.se, consumer loans and mortgage lending have been the most dynamic segments of the financial markets of Eastern European countries. However, the past couple of years have not been the most effective ones in the history of the consumer lending market. The financial market situation and the COVID-19 pandemic have provoked Europeans to seek more unsecured loans. And due to the common financial crisis all around the world, consumer loan applications jumped 43% since early March of 2020. In recent years, many European countries have faced the fact that their inflation rate is below what is needed to support economic growth.
What is expected for the upcoming years?
Another research done by the analysts at Smslansnabb shows that amid the pandemic, Swedish citizens began to take more loans. Hence, banks started to provide more consumer loans, even though most of the people could not pay their debts on time.
According to the latest data, as of the end of January 2021, the volume of loans provided by Swedish banks has been increased by 38%. On the other hand, during the year 2021, banks were more careful in providing consumer loans, taking into account the decline in household incomes.
According to the studies done by the specialists, even under a conservative scenario, the portfolio of consumer loans will grow by 35% over the next year. Experts explained that the acceleration is due to a combination of several factors - the implementation of delayed demand for loans, increased consumer activity, decline in real income dynamics, and accelerated inflation.
Analysts also added that a similar situation is observed in other segments of retail lending: mortgages and car loans by the end of the year will grow by more than 16%, which will be higher than the pre-crisis rates.
The COVID-19 crisis can accelerate shifts in consumer financial behavior in areas such as channel use or investment needs. Consumer finance providers need to address this subject in certain ways, including stimulating the increase of digital and other remote channels and raising customer awareness of these new channels, developing new products to satisfy new demands, and offering customer relationship management.
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