Consumer Credit in Taiwan

2020 IMPACT

Card lending sees slower growth as consumers exercise caution in their spending and borrowing

Card lending is expected to account for 68% over total gross lending within consumer credit in 2020, but only 4% of the overall outstanding balance. This reflects the way in which consumers in Taiwan utilise credit cards.

Government and banks offer incentives to borrow

To help stimulate the economy in the face of COVID-19, the government has taken a range of steps to support consumers and businesses. State-owned banks have been actively cooperating with the government to provide targeted relief measures on credit to small-and-medium-sized enterprises (SMEs) of severely affected industry sectors, with low-interest rates, extended repayment periods, online applications, and instant fund disbursement.

Consumers look to take advantage of government’s COVID-19 stimulus programme

Personal loans is expected to be the most dynamic category in terms of gross lending in 2020, with some consumers looking to take advantage of low interest rates and other government incentives to borrow. The government has also pushed for fintech innovations to speed up local applications.

RECOVERY AND OPPORTUNITIES

Card lending stands to benefit from push towards a cashless society

Card lending is expected to bounce back strongly in 2021 with consumers keen to start travelling and spending again once COVID-19 is contained. Many consumers have delayed making purchases of discretionary items in 2020 and therefore spending should rebound as consumer confidence picks up.

Digital banks offer new avenue for growth for personal loans

In the short term, other personal lending is expected to be mainly driven by government relief measures, which are pushing banks to offer competitive interest rates on personal loans. Personal loans is also expected to become more competitive as pure digital banks/neobanks enter the market.

Alternative financing offers some potential putting pressure on banks to adjust their lending criteria

Alternative financing is still underdeveloped in Taiwan, with alternative financial providers accounting for only 4% of gross lending in 2020 in current value terms. Banks account for most personal loans in Taiwan, which is partly due to the country’s high banked population, with 99% of those aged over 15-years-old being banked in 2020.