Preference for e-wallet is fast catching up with hard cash as one of the most widely-used modes of payment among Filipinos, a study by global information and insights company TransUnion said Wednesday.
Results of the first Credit Perception Index in the Philippines conducted by TransUnion Philippines showed that 96 percent of Filipinos surveyed choose cash, while preference for e-wallets is equally high at 93 percent over other modes of payment like the Buy Now Pay Later scheme and credit cards.
TransUnion Philippines president and chief executive Pia Arellano said the study assesses Filipinos’ perceptions towards credit and the factors contributing to their perceptions. The study aims to inspire meaningful dialogs and actions to improve credit literacy and financial inclusion at large for the Philippines.
“Improving financial literacy among our fellow Filipinos is a major step in fostering a more inclusive financial ecosystem in the country. By harnessing both traditional and alternative data to generate insights on an individual’s creditworthiness, it becomes possible for more consumers to be seen and included in the formal financial system, especially unbanked Filipinos constrained by lack of credit information available to them,” she said.
The study found that credit card penetration remains low despite longstanding presence in the Philippines, with only 25 percent of respondents owning a credit card, a sharp contrast to the 85 percent who have an e-wallet, which have only become available recently in comparison to credit cards in the country.
The fact that credit cards are a more widely held product in many markets around the world yet remain stagnant in the Philippines in terms of penetration may indicate a prevailing conservative attitude surrounding credit among the Filipino public, it said.
The CPI for the Philippines stands at 65 out of 100. The CPI factors in how Filipinos see credit across multiple dimensions, including their current attitudes, knowledge, trust, favorability and future receptivity.
The study found 69 percent of Filipinos surveyed have a general understanding of the concept of credit. Across credit products, 83 percent tend to be most knowledgeable about credit card installment payments, followed by personal loans at 77 percent, credit cards at 71 percent and Buy Now Pay Later at 69 percent.
Filipinos are far less familiar with mortgages, with only 58 percent of surveyed having awareness on this.
Awareness on auto loans and overdraft protection are even lower at 54 percent and 25 percent, respectively.
Trustworthiness in different credit products also follows a similar pattern, with credit card installment payments and personal loans seen as being more trustworthy, at 81 and 78 percent, respectively, and overdraft protection at 42 percent is less trusted among Filipinos surveyed.
This suggests a likely correlation between knowledge and trust – the more knowledgeable a consumer is about a credit product, the more trustworthy the consumer would find the product.
The study also takes a deeper look at the credit knowledge and perceptions of the Philippines’ unbanked population. The CPI of the unbanked population is at 53, 12 points lower than that of the general population.
Additional findings show that the notion of credit is often associated with debt, overspend and irresponsibility among consumers in the Philippines.
About 57 percent among those surveyed believe people acquiring credit products tend to overspend, and 50 percent believe that these people are already in debt. Many also believe that borrowers will eventually acquire unmanageable amounts of debt or will go to jail if they do not pay their debts.
“There is an enormous opportunity for the public and private sectors to work together to provide more formal and reliable channels for the Filipino public to acquire financial knowledge. Responsible credit use empowers consumers to realize their aspirations, whether that be starting a business, pursuing further education, or building a home. On a national scale, it also serves as a catalyst for economic growth, as proven by a great many economies around the world,” Arellano said.