By Weihan Sun
THE Philippine peso recently closed at P58 to $1, marking its worst close since November 2022. Headline inflation also increased to 3.9% in May, with housing, utility, and transport mainly contributing to the hike.
Despite these recent developments, I believe that there are still reasons to be optimistic after a year beset by various economic and financial challenges. The World Bank has projected the Philippines to be among the fastest-growing economies in the region on the back of the acceleration of private consumption. Results from our TransUnion Philippines Q1 2024 Consumer Pulse Survey conducted on Feb. 6-14 also show that Filipinos are becoming financially savvy. This is amid the increased usage of financial technology (fintech) services and a more proactive attitude towards financial literacy and responsible credit management.
TransUnion’s Q1 2024 Consumer Pulse Survey involved 977 Filipino consumers aged 18 years and older. Generations are defined as follows: Gen Z, 18-26 years old; Millennials, 27-42 years old; Gen X, 43-58 years old; and Baby Boomers, ages 59 and above.
THE RISING TIDE OF BUY NOW, PAY LATERBetween 2021 and 2023, the fintech landscape in the Philippines grew over 38%, going from 216 companies to 299, each offering various financial services. This indicates a growing demand for industry players who seek to make financial processes easier, increasingly digital, faster, and more secure.
One of the more noticeable areas that has seen growth in usage is buy now, pay later (BNPL). Defined as 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 of time, the results from our Q1 2024 survey show that reported BNPL service usage in the past twelve months grew to 42% in the period from 39% a year prior.
Awareness of BNPL services is high among the younger generations, as 81% of Gen Z and 86% of Millennials said they’ve heard of such offerings. Among those who’ve heard of BNPL, 65% of Gen Z and 68% of Millennials reported using BNPL services at least once in the past 12 months.
Among these generations, some of the top reasons they cited for using BNPL were that it was easy to apply for, they wanted to try it, to spread payments over time, and to afford a larger purchase. I see this as a highly positive sign. With younger generations comprising a sizable chunk of the local workforce, having both an openness and affinity for fintech services and alternative credit options indicate a strong desire for financial flexibility and to join the formal financial credit ecosystem.
CREDIT MONITORING MAKING A BIGGER SPLASHSince both Gen Z and Millennials are Internet and smartphone-savvy, they are more inclined to utilize available resources not only to enjoy better financial flexibility with digitally enabled services such as BNPL, but also to build credit literacy and good financial habits.
One of the findings that stood out to me from our Q1 2024 survey was the increase in credit monitoring among Filipinos. In terms of frequency, 70% of Filipinos reported checking their credit reports at least once a month, up from 66% in Q1 2023.
With the overall perception of the importance of credit monitoring remaining high, this uptick reflects a growing awareness about the importance of credit health and its implications on personal financial opportunities. Our latest survey results show that almost all (96%) of Filipinos consider credit and lending products to be important factors in achieving their financial goals.
I see this as another huge positive. With more Filipinos growing accustomed to transacting online and taking an active stance in monitoring credit, this suggests not only a more responsible attitude in credit management, but also a more vigilant attitude towards monitoring for possible instances of fraud.
DIVING INTO GREATER FINANCIAL FLEXIBILITY FOR GROWTHWith the summer season almost here, there is an opportunity for businesses to generate summer sales growth by aligning their business strategies with the consumer preference for flexible payment options.
As the popularity and awareness of alternative solutions such as BNPL continue to grow among younger generations, there are opportunities to further stimulate credit market growth across these emerging and increasingly credit-hungry consumers. To do so, further strengthening the decisioning process can help industry players expand access to a wider consumer base while protecting both the consumer and themselves from undue risk. By making credit more accessible through alternative credit methods like BNPL, banks and other formal financial institutions can drive operational efficiency and cater to the needs of those in search of added financial flexibility in a trusted and safe environment.
Weihan Sun is the principal of Research and Consulting for Asia Pacific at TransUnion.
