Gen Z more into buy now, pay later schemes – survey

MANILA, Philippines — The use of buy now, pay later (BNPL) services is on the rise in the Philippines, with the biggest increase observed among Gen Z consumers, according to a study from global information and insights company TransUnion.

In its First Quarter 2024 Consumer Pulse Survey conducted from Feb. 6 to 14 this year covering 977 Filipino consumers aged 18 years and older, TransUnion found that 82 percent of Filipinos have heard of BNPL.

BNPL is a type of short-term financing that allows consumers to purchase goods without having to pay the full amount at once.

Of those who are aware of BNPL, 63 percent said they had at least one BNPL transaction in the last 12 months, up from 61 percent in the first quarter of last year.

The study also found that 81 percent of those in Gen Z or aged 18 to 26 years old have heard of BNPL.

Of this age group,  65 percent said they made at least one BNPL transaction in the past 12 months, higher than the 57 percent in the first quarter of 2023.

TransUnion said this is the biggest increase among all generations.

Gen Z consumers who used BNPL cited it being easy to apply as the top reason for their use of the service.

Other top reported reasons include wanting to try the service (17 percent), spreading payments over time (11 percent) and having an alternative to afford a larger purchase (11 percent).

“For many Filipinos, BNPL services offer financial convenience and flexibility by letting them tailor their payment terms to best suit their needs and preferences,” Weihan Sun, principal of research and consulting for Asia Pacific at TransUnion said.

Given the increased usage of such services among consumers, especially the younger generation, TransUnion sees the need for businesses and other players in the formal financial sector to develop robust underwriting systems to cater to the expectations of an increasingly digital savvy demographic.

“This entails striking a delicate balance between capitalizing on the growing opportunities and mitigating potential risks in terms of operational efficiency and delinquency management,” Sun said.

TransUnion also found the act of credit monitoring has increased with 70 percent of Filipinos saying they checked their credit reports at least monthly, up from 65 percent in the first quarter of 2023, reflecting the increasing awareness on the importance of credit health and its implications on financial opportunities.

Those who said they checked their credit reports at least monthly are at 75 percent for millennial, 74 percent for Gen Z, 65 percent for Gen X and 56 percent for Baby Boomers.

Gen Zs who do not monitor their credit reports dropped to 14 percent this year from 17 percent in the fourth quarter of 2023.

As for the reasons for regularly monitoring their credit reports, 55 percent of Gen Zs did so to protect themselves against fraud. Other reasons cited were to learn of any credit offers they might qualify for (30 percent) and to find ways to improve their credit score (34 percent).

In terms of methods employed by fraudsters online, phishing or the deceptive practice of posing as a trustworthy entity in emails or via websites to steal sensitive information was the most reported scheme at 49 percent by Filipinos who were targeted with online, email, phone call or text messaging fraud attempts in the last three months.

Other common fraud methods reported were smishing which is similar to phishing but conducted through text messaging (43 percent) and money or gift card scams, which take place by deceiving someone into sending money or purchasing gift cards under false pretenses (36 percent).

TransUnion said younger segments of the population have shown a growing awareness for spotting scams with the percentage of Gen Z Filipinos who said they were not aware of being targeted by fraudulent schemes in the last three months dropping to 28 percent from 37 percent last year.

While it is encouraging to see the increased ability of younger Filipinos to recognize fraudulent schemes, Sun said fraudsters are able to adapt and exploit vulnerabilities.