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Unsecured Lending - Canada - October 2018

“The increased use of alternative credit scoring models is likely to facilitate disruption in the lending space and bring more borrowers into the financial mainstream.”
– Sanjay Sharma, Senior Financial Services Analyst

This report looks at the following areas:

  • A third of Canadians have outstanding credit card debt
  • Education is the leading reason for unsecured borrowing
  • Interest rates are the top choice factor
  • Around three in ten borrowers owe more than $10,000

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Table of contents

  1. Overview

      • Regional classifications
        • Income
        • Executive Summary

            • The issues
              • A third of Canadians have outstanding credit card debt
                • Figure 1: Ownership of unsecured debt, August 2018
              • Education is the leading reason for unsecured borrowing
                • Figure 2: Purpose of unsecured loans, August 2018
              • Interest rates are the top choice factor
                • Figure 3: Factors affecting choice of unsecured lender, August 2018
              • Around three in ten borrowers owe more than $10,000
                • Figure 4: Agreement with statements on consumer finances (% agree), August 2018
              • The opportunities
                • Around three in five parents with young children have unsecured debt
                  • Figure 5: Ownership of unsecured debt (select), parents vs non-parents, August 2018
                • Current banking relationship most important factor for over-55s
                  • Figure 6: Factors affecting choice of lender, by age, August 2018
                • Easier loan approvals and evolution of credit scores could foster innovation
                  • Two thirds of young women are constantly money stressed
                    • Figure 7: Select attitudes related to consumer finances (any agree), by gender, August 2018
                  • What it means
                  • The Market – What You Need to Know

                    • Aging population could mean fewer borrowers of unsecured debt
                      • On the other hand, a growing population and diversity could boost demand
                        • Perception of financial health continues to see improvement
                          • Credit fatigue may finally be settling in for Canadian consumers
                            • Peer-to-peer lending
                            • Market Factors

                              • Canada’s population is aging
                                • Figure 8: Population aged 0-14 and 65+, as of July 1, 1995-2035*
                              • Aging population could mean fewer borrowers of unsecured debt
                                • Figure 9: Canadian population, by age, 2016
                              • On the other hand, a growing population and diversity could boost demand for unsecured loan products
                                • Interest rates remain steady
                                  • Perception of financial health continues to see improvement
                                    • Figure 10: Perception of financial health, January/February 2015-18
                                  • Credit fatigue may finally be settling in for Canadian consumers
                                    • Peer-to-peer lending
                                    • Key Players – What You Need to Know

                                      • Tangerine enters the unsecured lines of credit business
                                        • LendingArch’s new rate comparison technology
                                          • Mogo reaches 600,000 members
                                            • FICO expands access to credit with New FICO Score XD 2
                                              • HSBC Bank Canada looking to boost retail presence
                                                • RBC plans to spend $3.2 billion in digital expansion
                                                  • TransUnion’s CreditView
                                                  • Innovations & Industry Developments

                                                    • Tangerine enters the unsecured lines of credit business
                                                      • LendingArch’s new rate comparison technology
                                                        • Mylo and financial rounding apps
                                                          • Other apps
                                                            • Mogo reaches 600,000 members
                                                              • Credit Karma launches Canada's first free credit monitoring service
                                                                • FICO expands access to credit with New FICO Score XD 2
                                                                  • HSBC Bank Canada looking to boost retail presence
                                                                    • RBC plans to spend $3.2 billion in digital expansion
                                                                      • TransUnion’s CreditView
                                                                        • Marketing strategy behind CreditView
                                                                          • Figure 11: Scotiabank’s CreditView dashboard customer email, July 2018
                                                                        • PayPal is starting to offer basic banking services to its customers
                                                                        • Marketing Campaigns

                                                                          • Game, set, match for National Bank
                                                                            • Fairstone Next Step Program
                                                                              • Figure 12: Fairstone next steps Financial Award, March 2018
                                                                            • Selected campaigns from Mintel Comperemedia
                                                                              • Borrowell
                                                                                • Figure 13: Borrowell mobile advertisement, August 2018
                                                                              • Mogo offers quick loans
                                                                                • Figure 14: Mogo direct mail campaign, May 2018
                                                                              • Kick start your training with Finfit
                                                                                • Figure 15: RBC’s Finfit email, April 2018
                                                                              • Debt consolidation marketing
                                                                                • Figure 16: Fairstone debt consolidation direct mail offer, May 2018
                                                                              • Marcus from Goldman Sachs (USA)
                                                                                • Figure 17: Personal loans from Marcus, direct mail offer, August 2018
                                                                            • The Consumer – What You Need to Know

                                                                              • A third of Canadians have outstanding credit card debt
                                                                                • Education is the leading reason for unsecured borrowing
                                                                                  • Interest rates are the top choice factor
                                                                                    • Around one in four would consider P2P lenders
                                                                                      • Around three in ten borrowers owe more than $10,000
                                                                                        • Around three in four borrowers prioritize paying off debt over saving
                                                                                        • Product Ownership

                                                                                          • A third of Canadians have outstanding credit card debt
                                                                                            • Figure 18: Ownership of unsecured debt, August 2018
                                                                                          • Around one in five consumers has two or more unsecured products
                                                                                            • Figure 19: Repertoire analysis of unsecured debt products, August 2018
                                                                                          • Women more likely to have credit card and student debt
                                                                                            • Figure 20: Ownership of unsecured debt (select), by gender, August 2018
                                                                                          • Better financial literacy can help young Canadians
                                                                                            • Lifestage influences ownership
                                                                                              • Figure 21: Ownership of unsecured debt, by age, August 2018
                                                                                            • Payday loans can spiral into a debt trap
                                                                                              • Around three in five parents with young children have unsecured debt
                                                                                                • Figure 22: Ownership of unsecured debt (select), parents vs non-parents, August 2018
                                                                                            • Purpose of Unsecured Debt

                                                                                              • Education is the top reason for unsecured borrowing
                                                                                                • Figure 23: Purpose of unsecured loans, August 2018
                                                                                              • Men and women have different reasons for borrowing
                                                                                                • Figure 24: Purpose of unsecured loans (select), by gender, August 2018
                                                                                              • Around half of 18-34s use unsecured debt for education
                                                                                                • Vehicle purchase and home repair are the top reasons for over-45s
                                                                                                  • Figure 25: Purpose of unsecured loans (select), 18-34s vs over-45s, August 2018
                                                                                              • Lender Choice Factors

                                                                                                • Interest rates are the top choice factor
                                                                                                  • Figure 26: Factors affecting choice of unsecured lender, August 2018
                                                                                                • Current banking relationship most important factor for over-55s
                                                                                                  • Figure 27: Factors affecting choice of lender, by age, August 2018
                                                                                                • Online and mobile applications matter more to 18-34s
                                                                                                  • Flexibility and speed of funds also important in a digital world
                                                                                                    • Easier loan approvals could help P2P lenders
                                                                                                      • Evolution of credit scores could increase innovation in unsecured lending
                                                                                                        • TURF Analysis
                                                                                                          • Methodology
                                                                                                            • Two in three borrowers are influenced by rates and previous banking relationship
                                                                                                              • Figure 28: TURF analysis – Factors affecting choice of lender, August 2018
                                                                                                          • Loan Financing

                                                                                                            • One in five customers applied for their loan in a bank branch
                                                                                                              • Figure 29: Agreement with statements on loans, August 2018
                                                                                                            • Men more likely to consolidate/refinance
                                                                                                              • Figure 30: Agreement with statements on loans (select), by gender, August 2018
                                                                                                            • Younger consumers are also more familiar with P2P lending
                                                                                                              • Figure 31: Agreement with statements on loans (Select), 18-44s vs over-45s, August 2018
                                                                                                            • Around one in four would consider P2P lenders
                                                                                                                • Figure 32: Attitudes related to lending, August 2018
                                                                                                              • Younger consumers and men more likely to prefer online applications
                                                                                                              • Consumer Finances

                                                                                                                • Around half of borrowers are comfortable with their debt levels
                                                                                                                  • Figure 33: Attitudes related to consumer finances, August 2018
                                                                                                                • Around three in four borrowers prioritize paying off debt over saving
                                                                                                                  • Younger consumers are more financially stressed and less responsible
                                                                                                                    • Figure 34: Select attitudes related to consumer finances (any agree), 18-44 vs over-45s, August 2018
                                                                                                                  • Two thirds of young women are constantly money stressed
                                                                                                                      • Figure 35: Select attitudes related to consumer finances (any agree), by gender, August 2018
                                                                                                                    • Parents with young children are also more stressed
                                                                                                                      • Figure 36: Attitudes related to consumer finances (any agree), parents vs non-parents, August 2018
                                                                                                                    • Around three in ten borrowers owe more than $10,000
                                                                                                                      • Figure 37: Agreement with statements on consumer finances (% agree), August 2018
                                                                                                                    • Over-55s more likely to use unsecured debt responsibly
                                                                                                                      • Figure 38: Agreement with statements on consumer finances (% agree), August 2018
                                                                                                                  • Appendix – Data Sources and Abbreviations

                                                                                                                    • Data sources
                                                                                                                      • Consumer survey data
                                                                                                                        • Abbreviations and terms

                                                                                                                        Unsecured Lending - Canada - October 2018

                                                                                                                        US $4,395.00 (Excl.Tax)