Gen Z Consumers Start to Shape Canadian Credit Market as They Become Increasingly Credit Active

  • Nearly 1.8 million Canadian Gen Z consumers now credit active
  • Credit cards are the most widely held product among credit active Gen Z consumers, followed by student loans and personal loans
  • Although starting from a very low base, mortgages, lines of credit and auto loans are the fastest growing categories among credit active Gen Z consumers
  • Credit-active Gen Z consumers more likely to be in near prime, prime and prime plus risk bands than wider population

TORONTO, Feb. 04, 2020 (GLOBE NEWSWIRE) --  Newly released research by TransUnion (NYSE: TRU) shows that Canada’s Generation Z consumers—those born in or after 1995—are becoming increasingly credit active and are helping fuel growth of the consumer credit market.

The global TransUnion study explored credit activity of Generation Z consumers (also known as Gen Z) in established consumer credit markets including Canada, the United States and Hong Kong, as well as emerging credit markets including Colombia, India and South Africa. The study explored the depersonalized credit data as of Q2 2019 of Gen Z consumers globally to understand their credit behaviors by country, specifically observing originations, account preferences and balances.

The percentage of the Canadian population that was classed as Gen Z, aged 24 years or younger as of Q2 2019, was 28%, representing more than 10.5 million people. The percentage of the population that is Gen Z and 18 or older, and thus eligible to apply for credit, was 8%, over 2.8 million people. The TransUnion study revealed that almost two-thirds (63%) of this eligible group were credit active, nearly 1.8 million people.

According to the study, this youngest credit-active generation has a strong appetite for credit despite many of these consumers growing up in difficult economic conditions. In markets such as Canada and the U.S., Gen Z saw their parents and other family members and friends suffer through bouts of unemployment and challenging economic conditions, especially in the 2008-2011 timeframe, that had not been seen in generations. However, in more recent years, economic conditions have been more favorable. In Canada, consistent GDP growth accompanied by a relatively low interest rate environment have provided conducive conditions for Gen Z as they seek and gain access to credit. Other factors such as technological advancements have also come into play.

“Gen Z is the first generation of digital natives, and they have come to expect a seamless consumer experience across all walks of life – including how they access, use and manage credit. As young adults, they are perhaps more aware than previous generations at this age of the importance of building and maintaining healthy credit to help navigate the modern economy. In turn, they are embracing credit opportunities and readily available tools to start building their financial resumes early,” said Matt Fabian, director of financial services research and consulting for TransUnion Canada. “Our belief is that the desire for credit among this generation is significant. In order to service this demand, it’s critical for lenders to have the ability to make more informed decisions on prospective customers and earn their trust as well as their business.”

The Credit Card is King Among Canadian Gen Z Consumers

Despite suggestions that credit cards have lost popularity with the youngest generation in favor of debit cards and digital payment options, they continue to be a key entry point and one of the most widely held credit products in most markets studied. A primary reason for this is that, in addition to their role facilitating purchase transactions, credit cards offer important utility in providing consumers liquidity and a source of short-term borrowing. At the same time, Gen Z consumers are relatively new to credit and have less developed credit profiles than broader populations in their respective markets. As such, lenders typically issue smaller card credit limits to Gen Z consumers in order to manage risk.

While this can lead to higher utilization rates, Gen Z consumers appear to be building healthy credit habits and are managing their credit cards responsibly. In Canada, almost all (99.8%) of credit-active Gen Z consumers have a credit card with a median balance per consumer of C$515. In comparison, only 50% of U.S. Gen Z credit-active consumers have a credit card and their median balance per consumer is US$606 (about C$790).

Popularity of Traditional Credit Products by Region for Gen Z
(Percentage of Credit-Active Consumers with Each Product Type)

Credit ProductCanadaColombiaHong
Credit Card99.8%32%91%11%5%50%
Student Loan28%22%N/A*8%N/A*39%
Auto Loan5%0.6%0.1%4%2%25%
Unsecured Personal Loan16%16%5%6%8%**4%

* Reporting of student loans by lenders in these countries is varied.
** Personal loans issued by non-bank lenders.

“Our study revealed that in the developed credit markets, Canada especially, credit cards are the most popular consumer credit product among Gen Z consumers. This presents an opportunity for card lenders to include lower-risk Gen Z consumers in their marketing campaigns. For personal loan issuers, there is a significant opportunity to capture some of the card share of consumer’s borrowing needs by offering compelling reasons to use a personal loan,” said Fabian. “In Canada – along with the U.S. which is the only other developed country in this study with significant student loan penetration – 28% of Gen Z borrowers have a student loan, a total of more than 506,000 Canadian consumers. The median balance per student loan account was C$9,191. At the same time, student loans do not appear to inhibit Gen Z access to other credit products, as nearly all credit-active Canadian Gen Z borrowers have a credit card.”

The types of credit products Gen Z consumers obtain tend to differ by market. The absence of heavily-penetrated card markets in developing countries has led to lower rates of credit card participation among Gen Z borrowers. As such, different products typically serve as the entry points to credit. In South Africa, just 5% of credit active Gen Z consumers have a credit card – instead, credit issued by clothing and apparel retailers is the most widely held product at 66%. In India, the most popular product for Gen Z consumers is a two-wheeler loan, with 21% market penetration, while only 11% of Gen Z borrowers have a credit card.

Gen Z Set to Shape Canada Consumer Credit Market for Years to Come

Just over a quarter of Canadian Gen Z consumers are currently credit eligible (i.e. over 18 years old) and as more come of age, the dynamics of the consumer credit market will continue to evolve. Although credit cards are the most widely held product among credit active Gen Z consumers, as this segment matures their credit demand will also expand to other products like personal loans, lines of credit and potentially mortgages, which will drive larger outstanding balances. When looking at the growth in product numbers, originations growth (the rate at which new accounts are being opened) is highest among credit active Canadian Gen Z consumers for mortgages (71%), line of credit (48%), auto loans (28%), credit cards (16%), and student loans (11%).

Canada Gen Z Risk distribution

A common myth is that all (or at least the vast majority) of Gen Z consumers are in the subprime credit tier because they don’t have long histories of positive credit repayment. There is also the assumption that new-to-credit consumers receive lower limits, driving higher utilization and negatively impacting their credit scores.

However, the TransUnion study found that the majority of Gen Z consumers are not subprime in their respective markets, and Canada was no exception.

Compared to the overall credit active population in Canada, Gen Z consumers are more likely to be near prime or prime and half (50%) have credit scores in the prime and above risk tiers.

Risk Tiers: Gen Z vs. Total Credit Active Population***

Credit Tier% of Gen Z Consumers% Total Credit Active Canada Population
Super prime7%36%
Prime plus21%16%
Near prime33%21%

***TransUnion CreditVision score risk tier segment definitions: subprime = 300-639; near prime = 640-719; prime = 720-759;
prime plus = 760-799; super prime = 800+

“We have seen that the use of expanded data sets and advanced analytic techniques can help lenders better understand the risk profiles of these younger borrowers and identify ways to engage them in a mutually profitable manner. Lenders that incorporate trended credit and alternative data can gain a better understanding of the specific risk profiles of Gen Z and as a result, are broadly able to provide more consumers with access to traditional credit products,” continued Fabian. “Equally, as Gen Z continues to build their credit history, it’s important for them to get into good habits. This will help them build a healthy financial foundation and continue to be able to access the opportunities they deserve.”

About TransUnion (NYSE: TRU)
Information is a powerful thing. At TransUnion, we realize that. We are dedicated to finding innovative ways information can be used to help individuals make better and smarter decisions. We help uncover unique stories, trends and insights behind each data point. This allows a variety of markets and businesses to better manage risk and consumers to better manage their credit, personal information and identity. Today, TransUnion reaches consumers and businesses in more than 30 countries around the world on five continents. Based in Burlington, Ontario, TransUnion Canada provides local service and support throughout Canada. Through the power of information, TransUnion is working to build stronger economies and families and safer communities worldwide. We call this Information for Good. Visit to learn more.

For more information or to request an interview, contact:

Katie Duffy, Ketchum