Canadians Demonstrate Financial Resiliency, but Remain Cautious about Credit and Spending, Focusing on Paying Down Debt

TransUnion’s most recent Consumer Pulse study* shows that Canadian consumers continue to demonstrate resiliency and remain positive about their financial outlook as the economy reopens. Over half of Canadian consumers (54%) said they feel some optimism about the future, and only one-third indicated their household income is currently negatively impacted by the COVID-19 pandemic, compared to 63% at the height of the pandemic in April 2020. Despite this optimism, Canadians have continued to defer discretionary spend and generally remain cautious about taking on new or additional credit, although there are some generational differences.

The study also showed a small percentage of consumers falling victim to digital fraud, as they appear to be savvy against schemes and use tools like credit monitoring to mitigate fraud attempts.

“As the economy reopens, Canadians have remained resilient and are hopeful about their financial futures,” said Matt Fabian, director of financial services research and consulting at TransUnion. “While many consumers are cautiously sitting on the sidelines, cutting back on spending and waiting to take on additional credit, younger generations – Gen Z and Millennials – are showing a greater appetite both for credit and increased discretionary spending compared to older generations.”

Canadians are paying down debt during COVID-19

The financial impact of the pandemic is continuing to decrease, with 33% of survey respondents indicating their household income is currently negatively impacted by COVID-19, down two percentage points from the last survey period, June 2-7, 2021, and down significantly from 2020. This decrease could be due to government subsidies and lender payment deferral programs that helped consumers withstand the economic shock of the pandemic.

As the financial effects of the pandemic subside, Canadians continue to actively deleverage and pay down debt. A quarter (25%) of respondents indicated they expect to be unable to pay their current bills and loans in full, compared to 70% of consumers who expressed concern about their ability to pay bills the week of March 30, 2020. This debt reduction has created a cash surplus among Canadian households – which may be due to pandemic restrictions and the inability to spend in person. Four in five respondents (83%) indicate they have not been in a past due status on their bill or loan payments in the last three months, consistent with TransUnion’s findings in the Q2 2021 Credit Industry Insights Report (CIIR), which showed delinquencies falling across all credit products throughout the pandemic.

Generational divides emerge around credit demand and spending as financial impact of pandemic subsides

While credit performance remains healthy in Canada, and despite consumers’ overall positive financial outlook, many are holding off on taking on additional credit. More than three-quarters (76%) of Consumer Pulse survey respondents indicated they are not planning to apply for new or refinance existing credit in the next year. However, this is not consistent across generations, with both Gen Z and Millennial respondents demonstrating a higher demand for credit. Nearly half of Gen Z respondents (48%) and 34% of Millennial respondents indicated they plan to apply for new credit or refinance existing credit within the next year. Gen Z has also demonstrated more of a willingness to spend more than other generations, with 22% reporting they have increased discretionary spending in the last three months, compared to 12% of Millennials, 11% of Gen Xers and 5% of Baby Boomers. Overall, 47% of consumers say they have reduced discretionary spending in the last three months.

“We’re seeing an imbalance in consumer demand for lines of credit, auto loans and mortgages, with younger individuals demonstrating that they are more ready than older generations to increase their spending,” said Fabian. “As the economy reopens, it remains to be seen what Canadian spending levels will look like given pent-up demands and a surplus of cash, but we expect Gen Z and Millennial consumers to continue leading the way on credit demand and spending.”

Consumers becoming savvy against digital fraud

As the prevalence of digital fraud attempts continues to rise, TransUnion’s most recent quarterly fraud analysis found that the percentage of digital fraud attempts increased 44.9% when comparing Q2 2021 to Q2 2020. While 30% of Consumer Pulse survey respondents reported being targeted by a digital fraud scheme in the past three months, the percentage of consumers who said they have become a victim is only at 3%. A potential reason for the small percentage of victims is the fact that consumer are taking an active role in monitoring their credit, with 44% of respondents stating they are monitoring their credit on at least a monthly basis, up from 41% in the previous survey period.

Millennials were more than twice as likely to have been a victim of fraud than any other generation, with 6% saying they acted on a fraud scheme, compared to 3% for Gen Z, Gen X and Baby Boomers. The most frequent digital fraud scheme reported was phishing.

TransUnion’s COVID-19 support center provides helpful information for consumers who are concerned about their ability to pay bills and loans. The complete Consumer Pulse study can be viewed here.

*The most recent Consumer Pulse study includes a survey of 1,042 Canadian consumers conducted between Aug. 16 and 20, 2021.

About TransUnion (NYSE: TRU)

TransUnion is a global information and insights company that makes trust possible in the modern economy. We do this by providing a comprehensive picture of each person so they can be reliably and safely represented in the marketplace. As a result, businesses and consumers can transact with confidence and achieve great things. We call this Information for Good.® TransUnion provides solutions that help create economic opportunity, great experiences and personal empowerment for hundreds of millions of people in more than 30 countries. Our customers in Canada comprise some of the nation’s largest banks and card issuers, and TransUnion is a major credit reporting, fraud, and analytics solutions provider across the finance, retail, telecommunications, utilities, government and insurance sectors.