Lusaka, Zambia,

Zambian Consumers Remain Optimistic, But Financial Worries Shift Spending Habits

A new survey by TransUnion has revealed a mixed financial outlook for Zambian consumers in the second quarter of 2023. While almost four in 10 (38%) saw an upswing in their income during the past quarter, and eight in 10 (82%) expect their incomes to increase in the coming year, many are bracing for an increase in their bill and loan obligations in the coming quarter, which will see them spending less.

According to the TransUnion Consumer Pulse Study for Q2 2023, millennials (born between 1980-1994) and Gen Z (1995-2012) are seeing the biggest increases in their incomes, mainly due to new business ventures and wage rises. Nearly four in 10 (37%) are using that additional money to repay their debts, and a quarter (25%) of Zambian households are working to boost their emergency savings.

Part of the reason for this prudent approach is that nearly four in 10 (39%) Zambian consumers are expecting increased financial obligations, which will cause nearly half (49%) of consumers of all ages to cut back on their discretionary spending and four in 10 (40%) to limit large purchases in the next three months.

This cautious outlook on future expenditure suggests that Zambian consumers are prioritising financial responsibility, indicating a noteworthy shift in spending habits, says Weihan Sun, Director of Research and Consulting at TransUnion Africa.

Respondents are taking different approaches to managing debt and loans in times of financial uncertainty. Of those unable to pay their bills in full, 43% choose to pay off their debts in instalments. Close to a third are prepared to dip into their savings to meet their financial commitments, while 29% are considering borrowing from friends and family.

The survey also highlighted a decline in access to credit and consumer confidence in the credit market. Nearly all consumers (96%) believe access to credit is crucial. However, less than a third (30%) said they have adequate access to credit, and six in 10 (62%) do not plan to apply for new credit or refinance existing loans, with rising interest rates as a contributing factor. In May, Zambia’s central bank increased its key lending rate to 9.5% from 9.25% as it battles inflation. 

For those planning to engage with credit (38%), personal loans are the product of choice (41%), followed by refinancing personal loans (25%) and new student loans (22%).

Managing financial choices

Most consumers (94%) acknowledge the significance of credit monitoring, and the survey indicates that more than half of consumers (53%) regularly check their monthly credit reports. However, Sun says it is ‘concerning’ that 30% of consumers do not monitor their credit reports. This highlights the need for more education and tools to support regular credit monitoring.

Opinions were mixed around the question of whether consumers believed their credit scores would improve if businesses used alternative data sets not included on a standard credit report, like rental payments, gym membership dues and short-term loan histories. While a significant proportion (47%) believed their scores would improve, a smaller number (15%) expected no change, and 7% predicted a decrease. Almost a third (31%) needed clarification on the impact, suggesting that educating consumers on the potential benefits of alternative data is important.

Only 28% of Zambian consumers conduct more than half of their transactions online, indicating a continued reliance on traditional methods. This presents a significant growth opportunity for digital channels.

Identity risks and usage

Digital fraud attempts remain a pressing issue for Zambian consumers, with 76% of those surveyed reporting that they had been targeted by such schemes in the last three months. Unfortunately, 9% were targeted and fell victims.

The most common types of fraud schemes included money/gift card scams (46% of respondents), 'smishing' (fraudulent text messages aimed at tricking the recipient into revealing personal data; 43% of respondents), and phishing or vishing scams (one in three consumers). Smishing was reported most frequently by Millennials and Baby Boomers, with the latter also reporting a higher occurrence of vishing attempts, at 56%.

As a result, Zambian consumers are highly concerned about the security of their personal information, with 95% expressing apprehension about sharing their personal details. The data highlights the crucial importance of trust and robust cybersecurity measures in financial transactions and interactions.

“Overall, it's clear that consumers are increasingly aware of the risks associated with digital fraud. With rampant scams, consumers are cautious about sharing personal information, fearing privacy invasion and identity theft. This indicates a significant need for stronger security measures and robust fraud prevention strategies in the digital space,” said Sun.

Consumers can get their free annual credit report from TransUnion here.