Consumer Credit in Germany

PROSPECTS

ECB expected to keep interest rates low for the foreseeable future

Following the ECB’s announcement that it is going to end its quantitative easing programme after a tapering phase and then potentially raise interest rates again, expectations of higher interest rates in the near future have fallen. As low interest rates make loans to consumers more attractive, categories such as auto lending are likely to benefit, especially in Germany where cars continue to be greatly valued.

Point-of-sale loans are picking up pace

In total, Germans borrowed less in 2018 relative to their disposable income when compared to 2006, for example. However, the way Germans borrow money and its purpose have changed, and are likely to change further.

Usage of credit cards is increasing

Germans, who are known for their resistance to credit cards, are slowly catching up with their European peers. Among all consumer credit categories, card lending is expected to be the fastest growing over the forecast period.

COMPETITIVE LANDSCAPE

Bricks-and-mortar outlets remain the most important for consumer credit

Among the most common channels for lending - retail, bank branches and the internet – retail, or POS loans, remain the most important. Retailers make it easier to buy goods and services by offering favourable conditions to their customers, which are often already priced into their margins.

Alternative financial service providers are growing

The vast majority of loans in 2018 continued to be offered by traditional financial service providers, mostly banks and insurance companies. The latter have stepped up their game over the last couple of years, seeking to boost profits in a low interest rate era.

German lenders in poor shape

Although the German economy is currently doing well, with the country enjoying almost full employment and consumers’ real incomes rising, German lenders are continuing to find it difficult to increase their profitability. Compared to their international peers, German banks still appear to not have recovered from the financial crisis.

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