The SARS-CoV-2 pandemic has taken us all by surprise and has changed the lives of people all around the world and in Poland. It has resulted in greater popularity of home office and online shopping. But how has the coronavirus pandemic affected the consumer credit market?
In accordance with the data of the Credit Information Bureau, in 2020 we saw a decrease in demand for cash loans. Even though lower interest in this type of financing was noticeable already at the beginning of the year, the coronavirus pandemic even intensified this tendency. The greatest difference was noted in April 2020 when a 44.4% drop was recorded. Even though the strongly decreasing trend became less intense in the following months, the demand for cash loans during the entire 2020 fell by 14%. Considerable decrease was noted in the non-bank loans – the demand for payday loans throughout 2020 decreased by 38.9% YoY. Similar to cash loans, the worst situation was noted in April 2020 when the demand for non-bank loans dropped by 63.8%. Only instalment credits remained unaffected. With this financing method, safe purchases were possible, often without extra costs.
Terms of granting loans during the pandemic – what has changed for customers?
There are several factors which had an influence on a decreased demand for cash loans in 2020 among individual customers. One of these factors was uncertainty as to the development of the epidemic in Poland and worldwide. Additional restrictions related to lockdowns made the financial situation of employees of hotel, catering, beauty (beautician services, hairdressers) and fitness sectors even worse. On the other hand, banks concerned about an unstable economic situation and increased risk associated with the granting of credit started using stricter credit control both in terms of the requirements regarding the customer’s credit worthiness and additional loan collateral as well as in terms of increased non-interest cost of loan.
What changes have we seen in the Polish consumer credit market in 2021?
Despite the fact that the pandemic has not come to an end yet, the consumer credit market has been revived in 2021. In July only, the number of cash loans granted by banks and credit and savings unions (SKOK) was higher by 25.7% than a year before. During the entire period from January to July 2021, the total number of cash credits granted amounted to 1,786.8 thousand (which means an increase by 16.1% in comparison to an analogous period in 2020) and accounted for PLN 38.34 billion (27.1% more than a year earlier). It should be noted that the recorded increases are compared to the year when the pandemic began and the demand for this type of financing considerably decreased. However, a growing trend is also associated with better economic mood and alleviation of credit conditions by banks. This results in reduced credit spread and increased maximum lending amount. What is more, banks are more and more inclined to grant loans in higher amounts between PLN 30,000 and 50,000 or above PLN 50,000. An examination of the situation in the credit market in terms of expectations of Q3 2021 indicates that the credit policy should be further alleviated and the demand for consumer loans should increase. Low interest rates resulting in relatively low costs of loans are conducive to this trend.
How has the coronavirus pandemic affected the functioning of banks and customer service?
Apart from changes related to decreased demand in the scope of consumer credits, the pandemic has also brought a change in the methods of granting the financing. On the one hand, banks were forced to implement the relevant security measures in private customer service. On the other hand, they had to focus on online service. The number of people who were allowed to be present in the bank branch at a time was limited during the first wave of the pandemic. These limitations came together with the keeping of distance both between customers and bank staff. Another important issue was also handled – the procedure of applying for the suspension of instalments was prepared for a large group of people who had financial problems due to the pandemic.
The options of handling formal bank procedures online or via telephone still apply and they definitely make it easier to use bank products and speed up the process of obtaining a credit decision.
Summary
The coronavirus pandemic has definitely changed the consumer credit market. But we can probably safely say that we have somehow got used to living with the virus around. Vaccination gives hope of the return to normal. The first reactions to the pandemic, which were related to uncertainty of the virus risk, had an adverse impact on the demand for consumer credit. This also led to reduced credit worthiness of customers and stricter credit policies of banks. The banks’ current policy in this regard is definitely milder and more customer-friendly. It is easier to obtain a consumer credit even though consumers are still obliged to have sufficient credit worthiness and a positive credit history.