Consumer Credit in Colombia

PROSPECTS

Consumer credit demand limited by sluggish economic performance

Due to the decelerating economy, durables gross lending saw positive but more moderate growth in 2019 compared to the review period as consumers are becoming more cautious. In light of the sluggish economy and GDP growth, consumers are less willing to apply for durable lending.

Unbanked population turning towards store cards

Most financial entities have been increasing the terms of current loans, consolidating different credits held with financial entities in to one loan, and offering possibilities for portfolio purchases at lower rates, especially for consumer credit and commercial loans. In the context of an economic slowdown and deteriorating credit risk indicators, financial entities are providing credits to known clients, rather than taking risks with new customers.

Rising incomes fuel demand for higher end vehicles and auto loans

Auto lending has benefitted from long term stable reference interest rates in Colombia. Furthermore, despite increasing prices as a result of local currency devaluation, rising disposable incomes have spurred sales of higher tier cars.

COMPETITIVE LANDSCAPE

Leading players adapting offering and positioning to attract consumers

Consumer credit players have been adapting to changing market conditions, with a number of financial institutions performing mergers and acquisitions. The arrival of Itaú, the purchase of Citibank’s consumer portfolio by Colpatria, and Serfinansa’s launch of the bank transformation process will clearly impact the competitive environment within consumer credit in Colombia.

Growing focus on unbanked populations and social responsibility

In recent years, leading financial players have embraced the idea of operating more responsibly given the important role played by banking institutions in the national economy. This new outlook has therefore helped to foster confidence in the system as a whole.

Focus on increased flexibility and expanded service

Customer satisfaction regarding the service offered by banks remains low, with loyalty rates being impacted by recurring complaints associated with collection, fees and poor advice regarding different credit products. Therefore, competition tends to centre around credibility and reputation, rather than product portfolios, which are typically similar among different financial entities.

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