Findings from the latest quarterly Q2 Consumer Pulse Study by global information and insights company and the Philippines’ first comprehensive private credit reference agency, TransUnion (NYSE: TRU), show that 86% of Filipinos in the Visayas and 84% of Filipinos in Mindanao are optimistic about their financial situations changing for the better in the next 12 months as the country continues its economic recovery.
All regions in the country tallied positive economic growth last year with some local economies in Visayas and Mindanao posting growth rates above the national average . With an improving economy buoying consumer sentiment, many consumers outside Luzon are looking to utilize credit to help them take charge of their finances.
According to the study findings, 48% of respondents from Mindanao and 42% of Visayas respondents plan to either apply for new credit or to refinance existing credit in the next 12 months. In terms of credit products, 51% of Mindanao respondents and 47% of Visayas respondents plan to apply for new personal loans.
High costs of credit impedes applications
While consumers outside of Luzon are open to the use of credit, the Consumer Pulse Study shows that 65% of Mindanao respondents and 48% of Visayas respondents who considered applying for new credit or refinancing old credit ultimately decided not to. Asked on their reasons why, 41% of Visayas respondents and 39% of Mindanao respondents cited the high costs of new credit and refinancing. Additionally, 36% of Visayas respondents and 30% of Mindanao respondents mentioned that they found an alternative funding source. Both Visayas (36%) and Mindanao respondents (33%) also believed that their application would be rejected due to income or employment status.
“For Filipinos, high interest rates and fear of being declined rank top among the factors that make accessing credit via loan application unappealing,” said Pia Arellano, president and CEO of TransUnion Philippines. “These complexities can help explain why Filipinos turn to informal lenders such as family and friends for their loan needs in lieu of banks and other financial institutions. To change the perception of the formal financial system as unfavorable and complex to borrowers, TransUnion Philippines believes that alternative data can be used by lenders to identify lower risk borrowers and provide them with better terms, pricing, and smoother processes on their credit and loan applications. This helps expand favorable access to credit to more Filipinos.”
VisMin consumers targeted by phishing schemes
Defined as a scheme where fraudsters pose as legitimate institutions to obtain sensitive information from targeted individuals, phishing emerged as the most common fraud scheme in the last three months. More than half (57%) of Visayas respondents and half (50%) of Mindanao respondents reported being targeted by phishing schemes in that time frame.
The power of information
Given the increased demand for credit, beyond comprehensively safeguarding consumer finances, financial institutions must also offer credit education tools to help improve financial literacy.
“As a provider of information solutions, TransUnion Philippines provides resources that help lenders empower consumers to successfully navigate the consumer credit landscape, confidently avail of credit products that suit their needs and promote overall credit health. Promoting financial literacy and making trust possible between consumers and businesses is an important first step in building strong, long-term, and mutually beneficial relationships,” said Arellano.
TransUnion’s Consumer Pulse Study surveyed 907 consumers in the Philippines from May 4-19, 2023. This quarterly survey examines shifting consumer attitudes and behaviors based on the dynamics of income, debt, and identity theft, with respondents ranging from Gen Z (born 1995-2004), Millennials (born 1980-1994), Gen X (born 1965-1979), and Baby Boomers (born 1944-1964). For more information, please view the full report of the Consumer Pulse Study.