Marketing Implications: According to this analysis, consumers in the U.S. are getting a handle on their debt faster than some other parts of the world. However, the study indicates that roughly 70% of mortgage debt and 80% of this deleveraging has come from default. In other words, much of this “progress” has come from lenders writing-off the amount, rather than debtor’s paying-down the balance. Further, up to 35% of defaults could be described as “strategic decisions,” where the debtor elected to walk away from a financial obligation.
The McKinsey paper seems to suggest that our deleveraging process will continue into the middle of 2013, but it might be over-simplifying the situation to suggest that means our storm of credit issues will be over. Just because a consumer has little or no outstanding debt on their personal balance sheet does not necessarily make him or her a good risk; it could mean that someone else had to write-off an obligation that consumer once held. If you sell big-ticket items where some form of credit often facilitates the purchase, this matters to you… and it makes qualifying your customers more important than ever. (A process that can begin with the marketing message you create.)