Financial services group Nedbank says it has reduced the minimum income required to open a gold credit card account, with the bank actively targeting a low-income customer base.
Nedbank said that customers will need to earn a minimum income of R5,000 a month and be expected to pay a monthly fee of R40, to qualify. Card delivery is free, and minimum payment debit orders will help customers manage their money better, it said.
“Nedbank sees financial inclusion as one of the most vital elements of our much-needed economic recovery in the wake of the devastating pandemic,” said Mpho Sadiki, head of function in Trading Products and Solutions at Nedbank.
“Although earning a regular income, many people cannot access the credit products that registered financial services providers offer, as most of these institutions still require a minimum income that remains out of reach”.
Credit, Sadiki said, is a crucial enabler for financial inclusion, and with its Gold Credit Card, Nedbank said it aims to lower the barrier to accessing credit for the majority of financially excluded consumers.
“Many of these people will now have the opportunity to get a credit card for the first time and will no longer be at the mercy of one of the over 40,000 ‘mashonisas’ or informal lenders operating in the country. These lenders are unregulated and known to charge interest rates as high as 50%, condemning many hardworking people to debt slavery.”
The below table shows how the new gold card compares to Nedbank’s other offerings.
When economic shocks stress the consumer credit ecosystem adversely, lenders have difficulty identifying resilient consumers, noted credit firm TransUnion.
Historically, macroeconomic conditions have been an important factor in the pace of credit growth, while consumer sentiment also has a significant bearing.
“There continues to be significant turbulence in the South African consumer credit market, with a number of potential new trends emerging, especially in the delinquencies space. Wider economic and political news continues to impact consumer sentiment and outlook, and these will shape the recovery as it continues to emerge,” it said.
TransUnion conducted its regular Consumer Pulse Study in August 2021, showing a number of important trends relevant to potential future demand and direction of the market in South Africa. The number of respondents anticipating in August that they would apply for new credit or refinance existing credit within the next year was just under a third (31%). Personal loans (43%) and new credit card (35%) applications continued to be top of the list, said TransUnion.
“Lenders need to constantly monitor for shifts in consumer behaviours and adapt to the changing demand and future preferences of consumers if they are to succeed. There is no doubt the road to recovery will be a bumpy one, but by being informed, lenders will have the best possible chance to compete and succeed,” said Carmen Williams, director of research and consulting at TransUnion South Africa.
Lenders remain focused on extending credit to existing customers rather than onboarding new borrowers. Average balances increased by 17.6%, and total credit limits increased substantially by 15.2%, while new loan amounts increased by only 2.2%, the group said.
Outstanding balances for credit cards (up 10.6% YoY) have been driven by consumers’ need to balance household budgets, maintain liquidity, and finance subsistence purchases, especially where incomes have been negatively impacted. However, increases weren’t evenly distributed, and a clear generational divide has emerged.