Car loans, credit cards and personal installment loans: who lends what?

TransUnion, a leading credit reporting agency, released numbers on sources of lending. Spoiler Alert: Banks don’t dominate every industry when it comes to consumer lending. In its Market Outlook Report, covering the fourth quarter of 2021, TransUnion presents a market share view for five types of consumer loans. Interestingly, four categories of lenders, credit unions, banks, finance companies and “others”, are balancing their consumer loan portfolios to cater to the US market. Asset mix is ​​critical for many financial institutions as it reflects their risk tolerance.

First, let’s eliminate shelter products because they are secured by real estate liens that protect lenders. In mortgage loans, 50% of the market goes to banks and 6% to credit unions. Specialized lenders, including fintechs, hold 40% market share, of which 4% falls into the “other” category. When it comes to home equity lines of credit, also known as HELOCs, the market is changing significantly, with banks holding an 82% share and credit unions holding 16%. Financial companies have a 2% share and the “other” category does not appear in the boards of directors.

Now comes the car loan. Here, banks play a smaller role, with only 20% market share, eclipsed by 26% market share of credit unions. Finance companies, such as Nissan Credit or Ford Motor Credit, hold the market with a 41% share. The “other” category, which includes second-chance finance companies and “buy here, pay here” lenders, holds 13% of the market.

In credit cards, banks dominate the mix, driven by major financial institutions such as those mentioned here. You see that banks have an 81% market share and credit unions have 7%. Financial companies hold 3% of the volume and the “other” category 9%.

Credit card issuers should note that financial companies, including fintechs, hold a 41% share of consumer lending. The banks lag behind by 10% with a share of 37%. Credit unions have three times the share of banks with a 21% market share, and the “other” category is barely on the cards.

Stock composition is something banks need to learn from the market. For example, as noted in our annual review of credit card profitability, credit cards are much more profitable than personal banking; in some years, the return on assets is three times higher. But when you balance a portfolio, with risk from different classes, consumer lending benefits households and revenue per customer.

Preview by Brian RileyDirector, Credit Advisory Services at Groupe Conseil Mercator