COVID-19's Financial Impact on Canadian Consumers: Week 3

The current global COVID-19 pandemic is creating major economic and financial distress for consumers across the globe. Millions of jobs in the Canadian economy are either affected or at risk. To help organizations make decisions at a time when information on consumer impact is still emerging, TransUnion is conducting weekly surveys to better understand consumers’ perceptions and expectations in this rapidly evolving situation. Here are the main findings from the survey conducted in week three.

Financial concerns easing for consumers, but small businesses are increasingly vulnerable

Government benefits, legislation and forbearance programs, and consumers getting their bearings in the crisis, have combined to ease some financial concerns.

However, the proportion of consumers saying they own a small business and are having to close now comprises 11% of those impacted. This indicates growing vulnerability in the small business sector, and we expect this percentage will continue to grow the longer lockdowns are in effect.

Both federal and provincial governments are launching additional measures to support small businesses.

Fifty-nine percent say household income has been impacted

Data collected in the week ending 13 April 2020 shows that:

• Under three in five (59%) Canadian consumers say they’re currently financially affected by the COVID-19 health crisis, down from 63% last week.
• Under the first wave of government protection, those who were retired or not employed may not have qualified for support. New policy rules have therefore had a greater impact on the Silent Generation and Gen Z, the generational cohorts that would have been most affected by these initial stipulations.

Sixty-six percent affected by reduced hours or job losses

Of the 59% of Canadians financially affected by COVID-19 (63% in week two):

• Thirty percent indicated this was due to a reduction in working hours (unchanged since week two)
• Twenty-five percent stated they’d lost their job (unchanged since week two)
• Eleven percent were small business owners reporting a loss of income or having to close (10% in week two)

Sixty-six percent concerned about ability to pay bills and loans

Of those who say they’ve been affected financially, 66% are concerned about their ability to pay bills and loans — down slightly from the previous week (68%).

The Emergency Response Benefit may also be affecting the length of time consumers can pay bills:

• Forty-five percent of those impacted (17% of the population) now think they can go one to three months before not being able to pay bills (40% in week two)
• Eight percent of those impacted (3% of the population) say they won’t be able to pay bills within the next week (11% in week two)

Impacted Canadians said they will not be able to pay:

• Credit card debt (51%; down from 53% in week two)
• Auto loans (22%; down from 24% in week two)
• Personal loans (20%; down from 22% in week two)
• Medical bills (8%; down from 11% in week two)

The drop in percentage points indicates consumers are benefiting from subsidies, getting better at managing through the crisis, or both.

Budget shortfall is C$1,035.20

On average, consumers who are affected expect they’ll be short by C$1,035.20 (up 8% from C$959.20 in week two) when paying bills or loans.

Gen X estimates increased by 24.5% week-over-week to C$1,222.80 — the largest increase of all generational cohorts.

Consumers who were impacted expect they will not be able to pay their bills or loans in 6.6 weeks (6.4 weeks in week two).

Some consumers plan to pay only a portion of bills or debt

More consumers are turning to withdrawals from savings and retirement accounts to offset shortfalls. This is a concern, as it may affect retirement and overall net worth.

• Twenty-one percent plan to borrow money from a friend or family member (unchanged from week two) or rely on government stimulus (20%; unchanged from week two)
• Twenty-eight percent will use money from tax-free savings accounts or registered retirement savings plans (up from 25% in week two)
• Eight percent say they’ll take a personal loan for short-term liquidity (down from 10% in week two)
• Nineteen percent say they don’t know how they’re going to pay (18% in week two)

To date, two in five impacted consumers (40%) have reached out to the companies they have accounts with to discuss options. Separately, three in five impacted consumers (61%) indicated companies they have accounts with provided them with guidance on payment options.

Fraud more prevalent among younger consumers

As the world adjusts to new working practices implemented in response to COVID-19, fraudsters and cyber attackers have been quick to find ways of exploiting the pandemic to target businesses and individuals.

Almost 30% of respondents have been targeted by a fraud scheme related to COVID-19. This includes 25% who did not become a victim and 4% who did (double week two’s 2%).

Fraud is more prevalent among younger consumers with almost 40% of Gen Z responders being targeted. This makes sense as this generation is more predisposed to conducting transactions digitally and on mobile devices.

Credit monitoring on the rise

More consumers indicated they’re checking credit scores at least once a year (67%).

Younger generations are more likely to monitor their scores — nearly half of Gen Z consumers and two in five Millennials check at least monthly. Because these consumers are more digitally engaged, they’re likely using the free monitoring services provided by many lenders online and getting monthly updates pushed to their devices.

Of those who do monitor their credit score, half are taking advantage of the free monitoring services provided by lenders.
 

Additional resources:
We’ve developed several resources to assist businesses and consumers navigate this difficult time. To learn more about our weekly consumer research and download the latest reports and infographics, visit https://www.transunion.ca/financial-hardship-study#latest-report