Filipinos sees value of credit with access to financing

By Komfie Manalo

Financial inclusivity is encouraging Filipinos to embrace the value of credit as financial facilities are now more accessible than they were pre-pandemic, the TransUnion Credit Perception Index (CPI) study prepared by the private credit reference agency TransUnion showed

TransUnion surveyed 1,000 consumers of the general population, as well as an oversample of 200 FinTech professionals between March and April 2024 and found the CPI for the Philippines improved by four points, showing improved willingness to embrace credit,

"The Credit Perception Index (CPI) assessed Filipinos' current attitudes and future openness to credit, examining their knowledge, trust, and favorability toward credit and other financial products," TransUnion Asia Pacific principal of research and consulting Weihan Sun said in a virtual briefing.

TransUnion's second CPI study showed that the Philippines' CPI currently stands at 69, up by four points from last year, reflecting an improved concept knowledge, product knowledge, trust and favorability in credit products among Filipinos.

"Now, there's a lot of things that contributed to this. So one of the important things, especially in a developing market, is when consumers gain additional access to the credit market, their perception of credit automatically improves because previously, you know, if a consumer goes to a traditional lender and they apply for a loan and they're declined, their perception is very sour and very negative because they feel very excluded," he said.

"As the government, as well as the banking and financial services sector in general, continues to promote inclusion, we're likely to see this perception index improve," he added.

Sun, however, said the unbanked CPI was 39, 14 points lower than in 2023, reflecting a further deterioration of credit perception and knowledge.

Sun said that if the government achieves its goal of transforming the Philippines into an upper-middle-income country, the number of unbanked people will remain the same.

The CPI for FinTech professionals was 91, 22 points higher than that of the general population, which shows that they are more in favor of credit and understand it better than most Filipinos.

TransUnion's study showed that 70% of Filipinos generally understand the concept of credit.

Across credit products, Filipinos are most knowledgeable in installment payments (82%), followed by credit cards (76%) and buy now pay later (BNPL) services (74%).

BNPL at 74% and credit cards at 72% are also growing in favor among the general population, rising five and nine percentage points from 2023.

The study found that only 54% of unbanked Filipinos are knowledgeable about credit—a 16 percentage point deficit compared to the general population and a 29 percentage point gap compared to professionals from the financial technology sector.TransUnion surveyed 1,000 consumers of the general population, as well as an oversample of 200 FinTech professionals

between March and April 2024 and found the CPI for the Philippines improved by four points, showing improved willingness to embrace credit.

"The Credit Perception Index (CPI) assessed Filipinos' current attitudes and future openness to credit, examining their knowledge, trust, and favorability toward credit and other financial products," TransUnion Asia Pacific principal of research and consulting Weihan Sun said in a virtual briefing.

TransUnion's second CPI study showed that the Philippines' CPI currently stands at 69, up by four points from last year, reflecting an improved concept knowledge, product knowledge, trust and favorability in credit products among Filipinos.

"Now, there's a lot of things that contributed to this. So one of the important things, especially in a developing market, is when consumers gain additional access to the credit market, their perception of credit automatically improves because previously, you know, if a consumer goes to a traditional lender and they apply for a loan and they're declined, their perception is very sour and very negative because they feel very excluded," he said.

"As the government, as well as the banking and financial services sector in general, continues to promote inclusion, we're likely to see this perception index improve," he added.

Sun, however, said the unbanked CPI was 39, 14 points lower than in 2023, reflecting a further deterioration of credit perception and knowledge.

Sun said that if the government achieves its goal of transforming the Philippines into an upper-middle-income country, the number of unbanked people will remain the same.

The CPI for FinTech professionals was 91, 22 points higher than that of the general population, which shows that they are more in favor of credit and understand it better than most Filipinos.

TransUnion's study showed that 70% of Filipinos generally understand the concept of credit.

Across credit products, Filipinos are most knowledgeable in installment payments (82%), followed by credit cards (76%) and buy now pay later (BNPL) services (74%).

BNPL at 74% and credit cards at 72% are also growing in favor among the general population, rising five and nine percentage points from 2023.

The study's results also revealed that fewer Filipinos are optimistic that their financial situations will improve in the next year, with the unbaked struggling the most with the current situation.

Despite these uncertainties, TransUnion noticed a shift toward diversifying financial tools, with significant increases in the ownership of credit-based products and bank accounts.

Both credit cards (40%) and personal loans (25%) increased by 15 and four percentage points from last year, while debit cards (52%), savings accounts (75%), and virtual bank accounts (29%) increased by 12, 11, and nine percentage points, respectively.

"The improved 2024 CPI score of the Filipino population is a product of collective efforts to foster greater financial literacy and inclusion. Despite financial uncertainties, we are delighted to see Filipinos proactively seeking ways to manage their finances better and unlock economic opportunities through responsible credit use," Sun said.

"However, disparities in credit knowledge still exist. He added that continued efforts are needed to expand access and services to unbanked Filipinos, enabling them to realize the benefits of being financially included," he added.