FinTechs Continue to Drive Personal Loan Growth
Q4 2018 TransUnion Industry Insights Report Features the Latest Consumer Credit Trends

The FinTech revolution has propelled unsecured personal loans to another record-breaking quarter. TransUnion’s (NYSE: TRU) Q4 2018 Industry Insights Report found that personal loan balances increased $21 billion in the last year to close 2018 at a record high of $138 billion. Much of this growth was driven by online loans originated by FinTechs.

FinTech loans now comprise 38% of all unsecured personal loan balances, the largest market share compared to banks, credit unions, and traditional finance companies. Five years ago, FinTechs accounted for just 5% of outstanding balances. As a result of FinTech entry to the market, bank balance share decreased to 28% from 40% in 2013, while credit union share has declined from 31% to 21% during this time.

TransUnion also found that FinTechs are competitive with banks, with both lenders issuing loans averaging in the $10,000 range, compared to $5,300 for credit unions. Across all risk tiers and lender types, the average unsecured personal loan debt per borrower was $8,402 as of Q4 2018.

“FinTechs have helped make personal loans a credit product that is recognized as both a convenient and simple way to obtain funding online,” said Jason Laky, senior vice president and TransUnion’s consumer lending line of business leader. “More and more consumers see value in using a personal loan for their credit needs, whether to consolidate debt, finance a home improvement project or pay for an online purchase. Strong consumer interest in personal loans has prompted banks and credit unions to revisit their own offerings, leading to more innovation and choice for borrowers from all risk tiers.”

The Share of FinTech Total Personal Loan Balances Has Grown Rapidly

Year	Bank	Credit Union	Traditional Finance Company	FinTech
2018	28%	21%	13%	38%
2017	30%	22%	13%	35%
2016	32%	23%	16%	29%
2015	35%	25%	19%	21%
2014	39%	28%	22%	11%
2013	40%	31%	24%	5%

Personal loan originations increased 22% during Q3 2018, marking the fourth consecutive quarter of 20%+ annual origination increases. While the subprime risk tier grew the fastest, prime and above originations (those with a VantageScore 3.0 of 661 or higher) represented 36% of all originations. More than 19 million consumers now have a personal loan product, an increase of two million from a year earlier in Q4 2017 and the highest level ever observed.

Q4 2018 Unsecured Personal Loan Trends

Personal Loan Metric	Q4 2018	Q4 2017	Q4 2016	Q4 2015
Total Balances	$138 billion	$117 billion	$102 billion	$88 billion
Number of Unsecured Personal Loans	21.1 million	18.2 million	16.9 million	15 million
Number of Consumers with Unsecured Personal Loans	19.1 million	16.9 million	15.8 million	14.4 million
Borrower-Level Delinquency Rate (60+ DPD)	3.63%	3.29%	3.83%	3.62%
Average Debt Per Borrower	$8,402	$8,083	$7,640	$7,360
Prior Quarter Originations*	4.6 million	3.8 million	3.5 million	3.8 million
Average Balance of New Unsecured Personal Loans*	$6,217	$6,218	$5,443	$5,303

*Note: Originations are viewed one quarter in arrears to account for reporting lag.

“Similar to the personal loan market, we continue to see a solid performance by consumers with auto loans, credit cards, and mortgages,” said Matt Komos, vice president of research and consulting in TransUnion’s financial services business unit. “Consumers continue to have a strong appetite for credit. And while serious delinquency rates are rising for some products, they have remained at low levels. We continue to monitor the credit market for any changes and will have a better understanding of the potential impact the federal government shutdown has had on the credit market during the next quarter.”

Though the federal government shutdown began near the end of the fourth quarter and likely had minimal impact to the Q4 2018 consumer credit metrics, TransUnion is offering support to those people impacted via its website and dedicated government shutdown phone line. Federal employees affected by the shutdown who want to learn how to protect their credit can visit https://www.transunion.com/about-us/government-shut-down.

TransUnion’s Q4 2018 Industry Insights Report features insights on consumer credit trends around personal loans, auto loans, credit cards, and mortgage loans. For more information, please register for the TransUnion Q4 2018 IIR Webinar.

The Number of Consumers with a Credit Card Hits Another Milestone
Q4 2018 IIR Credit Card Summary

The number of consumers with access to a credit card increased to a record 178.6 million at the close of 2018. Over the last four quarters, four million more individuals gained access to card credit. This growth was primarily driven by a 4.3% year-over-year increase in subprime borrowers, alongside a 3.1% year-over-year increase in prime plus and super prime. Subprime also led the other risk tiers in originations in Q3 2018, with a 9.6% year-over-year increase in originations. Overall, balances grew by 4.9% year-over-year, with growth occurring across all risk tiers for the 19th straight quarter. This included super prime balance growth of 6.8% year-over-year and subprime balance growth of 7.2%. Credit lines matched balance growth at 4.9% year-over-year in Q4 2018, ending a nine-quarter trend of balance growth exceeding credit line growth. The report also found that serious delinquency rates rose to 1.94%; however, they remain well below recession-era levels and are near the "new normal" mark.

Instant Analysis

“Balance growth was highest at opposite ends of the risk spectrum. Super prime balance growth was attributed to an increase in the number of super-prime consumers with access to a credit card coupled with strong spend this past holiday season. However, the subprime segment was also a major driver of origination, balance and 90+ DPD delinquency trends this quarter.” - Paul Siegfried, senior vice president and credit card business leader at TransUnion

Q4 2018 Credit Card Trends

Credit Card Lending Metric	Q4 2018	Q4 2017	Q4 2016	Q4 2015
Number of Credit Cards	429.9 million	418.6 million	404.4 million	381.2 million
Borrower-Level Delinquency Rate (90+ DPD)	1.94%	1.87%	1.79%	1.59%
Average Debt Per Borrower	$5,736	$5,644	$5,486	$5,337
Prior Quarter Originations*	16.4 million	16.3 million	17.5 million	15.4 million
Average New Account Credit Lines*	$5,247	$5,194	$5,373	$5,068

*Note: Originations are viewed one quarter in arrears to account for reporting lag.

Auto Originations on the Upswing, Though This Trend May Not Last
Q4 2018 IIR Auto Loan Summary

After a steep decline in originations in Q3 2017, originations grew by 0.5% year-over-year in Q3 2018, with above prime consumers leading the growth. Originations are viewed one quarter in arrears to account for reporting lag. While subprime saw a slight 1.7% year-over-year increase in originations, the origination mix continues to shift toward the above prime segments, with prime plus and super prime share together increasing 0.9% year-over-year. Total balances grew at a slower rate of 4.6% year-over-year, the lowest Q4 year-over-year increase since 2011. Delinquencies have remained stable with little to no change across most risk tiers.

Instant Analysis

“Our financing model has given us valuable insight into the auto finance market and as such, we expect demand for new vehicle loans to continue to soften in 2019. Even as lenders continue to make credit available to subprime borrowers, we expect them to balance this demand and anticipate originations to flatten. However, steady delinquency rates continue to highlight the underlying positive health of the auto finance market despite potential headwinds such as auto tariffs and additional interest rate increases.” - Brian Landau, senior vice president and automotive business leader at TransUnion

Q4 2018 Auto Loan Trends

Auto Lending Metric	Q4 2018	Q4 2017	Q4 2016	Q4 2015
Number of Auto Loans	82 million	79.4 million	75.8 million	71.1 million
Borrower-Level Delinquency Rate (60+ DPD)	1.44%	1.43%	1.44%	1.27%
Average Debt Per Borrower	$18,858	$18,597	$18,391	$18,004
Prior Quarter Originations*	7.1 million	7.1 million	7.5 million	7.5 million
Average Balance of New Auto Loans*	$21,520	$20,909	$20,743	$20,245

*Note: Originations are viewed one quarter in arrears to account for reporting lag.

Mortgage Market Continues to Soften Even as Delinquencies Drop
Q4 2018 IIR Mortgage Loan Summary

Serious mortgage delinquency rates have continued to remain low. The serious delinquency rate for Q4 2018 was 1.66%, down from 1.86% at the same time last year. In addition, 15 of the 20 largest MSAs experienced double-digit year-over-year percentage declines. Even as mortgage originations continue to remain low relative to past years, TransUnion observed a slight increase in lending activity to subprime borrowers. Originations to subprime borrowers increased 2.1% over the same time last year, while all other risk tiers experienced an average of a 4.3% decline. The overall origination risk mix remained largely stable with subprime originations making up less than 4% of originations and prime and above originations making up over 80% of total originations. This quarter, average new mortgage account balances dropped to $227,376 from $228,563 in Q4 2017.

Instant Analysis

“Only three MSAs, Houston, Miami, and Tampa, experienced an uptick in year-over-year delinquencies. This was expected, as the comparison point is Q4 2017, a quarter when those MSAs experienced an artificially low delinquency rate due to natural disaster forbearance programs. The decrease we’re seeing in new account balances could be due to a number of factors, the largest of which may be a change in the mix of mortgage originations from high-priced MSAs to low-priced MSAs. Of the top 20 MSAs, those with an average new account balance of over $270,000 had a decline of 17% in year-over-year originations, while those with an average new account balance of less than $270,000 saw only a 2% decline in year-over-year originations.” - Joe Mellman, senior vice president and mortgage business leader at TransUnion

Q4 2018 Mortgage Loan Trends

Mortgage Lending Metric	Q4 2018	Q4 2017	Q4 2016	Q4 2015
Number of Mortgage Loans	52.8 million	53.2 million	52.0 million	52.6 million
Borrower-Level Delinquency Rate (60+ DPD)	1.66%	1.86%	2.28%	2.46%
Average Debt Per Borrower	$206,922	$201,736	$194,415	$189,914
Prior Quarter Originations*	1.8 million	1.9 million	2.2 million	1.9 million
Prior Quarter Average Balance of New Mortgage Loans*	$227,376	$228,563	$235,820	$214,799

*Note: Originations are viewed one quarter in arrears to account for reporting lag.

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, using historical information as well as alternative data sources. 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 has a global presence in more than 30 countries and a leading presence in several international markets across North America, Africa, Latin America, and Asia. Through the power of information, TransUnion is working to build stronger economies and families and safer communities worldwide.

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December 2015