Access to credit remains limited to Filipinos

CEBU, Philippines —   While 96 percent of Filipinos consider credit and lending products as important factors in achieving their financial goals, greater access to credit remains an issue as only one-third of Filipinos  or 35 percent believe they have sufficient access to credit and lending products, TransUnion’s first quarter 2024 Consumer Pulse Survey revealed.

Gen Z emerged as the group that said they had the least access to credit and lending products at 32 percent, followed by Baby Boomers (30 percent), Millennials (28 percent), and Gen X (26 percent).

The quarterly Consumer Pulse Survey by global information and  insights company TransUnion explored consumers’ recent personal finance and fraud experiences, and what financial changes they expect in the future.

Born in a time of smartphones and social media, Gen Z Filipinos are tech natives comfortable in carrying out transactions online with 88 percent saying that they have done so in the first quarter of 2024.

As more Gen Z Filipinos become part of the workforce, around 89 percent expected their income to increase in the next 12 months — the most of any surveyed generation.

Gen Z’s technological literacy and personal financial outlook appeared to contribute to a trend observed with Buy Now Pay Later (BNPL) services — an alternative credit-enabled payment method that allows consumers to immediately finance purchases and pay them back in fixed installments over a relatively short period.

Among all Filipinos who said they have heard of BNPL (82 percent), almost two-thirds (63 percent) said they had made at least one BNPL transaction in the last 12 months compared to 61 percent in the first quarter of 2023.

However, among those in Gen Z who said they have heard of BNPL (81 percent), an even higher percentage (65 percent) said they made at least one BNPL transaction in the past 12 months. This is up from 57 percent in the first quarter of 2023, the biggest increase among all generations.

More than two-thirds (68 percent) of Millennials who claimed awareness of BNPL (86 percent) said they made at least one BNPL purchase in the same timeframe.

“It was easy to apply” is the top reason Gen Z said they used BNPL. Some of the other top reported reasons include they just wanted to try it (17 percent), spreading payments over time (11 percent ), and as an alternative to afford a larger purchase (11 percent).

“For many Filipinos, Buy Now Pay Later services offer financial convenience and flexibility by letting them tailor their payment terms to best suit their needs and preferences.

With the noted increase in usage of such services among consumers, especially the younger generation, businesses, and other players in the formal financial sector must develop robust underwriting systems to efficiently cater to the expectations of an increasingly digitally 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,” said Weihan Sun, Principal of Research and Consulting for Asia Pacific at TransUnion.

The act of credit monitoring has also increased with seven-in-ten (70 percent) Filipinos saying they checked their credit reports at least monthly – an increase of five percentage points from 65 percent in the first quarter of 2023.

This uptick reflects a growing awareness of the importance of credit health and its implications on financial opportunities.

Millennials (75 percent) and Gen Z (74 percent) are the Filipino generations who said they checked their credit reports at least monthly, followed by Gen X (65 percent) and Baby Boomers (56 percent).

The percentage of Gen Z Filipinos who said they do not monitor their credit reports also fell to 14 percent from 17 percent in the fourth quarter of 2023.

According to the survey, over the past year, the percentage of Gen Z Filipinos who said they do not monitor their credit reports fell every quarter —from 29 percent in the first quarter of 2023.

Among their reasons for regularly monitoring their credit reports, 30 percent of Gen Z did so to learn of any credit offers they might qualify for, while 34 percent checked to find ways to improve their credit score.

However, both reasons are eclipsed by their need to protect themselves against fraud —a consideration shared by 55 percent of Gen Z Filipinos.

TransUnion is a global information and insights company with over 13,000 associates operating in more than 30 countries, including the Philippines.

In the Philippines, TransUnion was the first comprehensive private credit reference agency (CRA). It serves a range of clients across multiple sectors, including international, national and rural financial services providers, telecommunications, uti-lities, FinTech, and retail organizations.