TransUnion, a top credit reporting agency, published numbers on lending sources. Spoiler Alert: Banks do not dominate every sector regarding consumer lending. In its Market Perspectives Report, covering Q4 2021, TransUnion presents a view of market share for five consumer loan types. Interestingly, four lender categories, credit unions, banks, finance companies, and “other,” balance their consumer lending portfolios to address the U.S. market. The asset mix is essential for many financial institutions because it reflects their risk tolerance.
First, let’s get shelter products out of the way because they are collateralized with property liens that protect lenders. In mortgages, 50% of the market falls to banks and 6% to credit unions. Specialized lenders, including fintechs, have a 40% market share, with 4% falling to the “other” category. When it comes to home equity lines of credit, also known as HELOC, the market shifts substantially, with banks having an 82% share and credit unions owning 16%. Finance companies have a 2% share, and the “other” category is not on the boards.
Now comes auto loans. Here banks play a less significant role, with only a 20% market share, overshadowed by 26% market share credit unions. Finance companies, such as Nissan Credit or Ford Motor Credit, own the market with a 41% share. The “other” category, which includes second-chance-finance companies and buy-here-pay-here lenders, owns 13% of the market.
In credit cards, banks dominate the mix, driven by top financial institutions such as the ones mentioned here. You find that banks have an 81% market share, and credit unions own 7%. Finance companies hold 3% of the volume and the “other” category 9%.
Credit card issuers should note that finance companies, including fintechs, hold a 41% share in consumer lending. Banks are 10% behind with a 37% share. Credit unions have three times the banks’ share with a 21% market share, and the “other” category is barely on the charts.
The share mix is something for banks to learn from the market. For example, as noted in our annual review of credit card profitability, credit cards are much more profitable than consumer banking; in some years, the Return on Assets is three times as much. But when you balance a portfolio, with risks coming from different classes, consumer lending benefits households and the revenue per customer metric.
Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group