Banks are progressively offering credit cards to minors aged 20 and younger, according to the Central Bank.
Fresh Take:
Youngsters under 20 are sticking to credit cards as their go-to loan option, according to recent findings.
The surge in credit card issuance to under 20s has been a noticeable trend in the banking industry. In the third quarter of 2024, this age group grabbed a whopping 11% of all cards issued. Interestingly, 20 to 30-year-olds in Russia saw the highest number of cards issued in the fourth quarter of the same year.
A significant chunk of mortgages, about 68%, went to individuals aged 20 to 40 from October to December 2024. Unfortunately, only 1.6% of mortgage approvals were granted to those below 20.
The Central Bank reported a decrease of 500,000 borrowers in the second half of 2024, bringing the total count to 50.1 million. On the flip side, the number of Russians with microloans bulged to 10 million by the end of the year, with an increase of 500,000. Over half (49.6%) of the total debt to banks is held by borrowers with three or more loans. The Central Bank also noted a gradual improvement in loan approvals for individuals with good creditworthiness from the fourth quarter of 2024.
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Insights:
- The rise in credit card usage among the youngest age group can be associated with a broader focus on convenience, speed, and digital payment adoption in Eastern Europe, including Russia[1].
- Factors such as greater exposure to digital financial products, rewards programs, online shopping, and mobile technologies likely contribute to the adoption of credit cards by young consumers[5].
- While mortgage lending is more common among older age groups, due to their financial stability, young consumers might lean towards microloans for immediate short-term financial needs, as they don't require substantial credit history[1].
- The adoption of digital payments, including credit cards, in Eastern Europe is driven by the growing infrastructure for digital payments and consumer preferences for easy transactions and accessibility[1].
Businesses observing the trend may see an opportunity to focus on personal-finance education for younger individuals, addressing credit card management and long-term financial planning. With the increase in microloans among young consumers, it would be wise for financial institutions to develop strategies that cater to this demographic's unique financial needs and enhance their digital offerings for easier access.
