In the Financial Inclusion Survey released by the Bangko Sentral ng Pilipinas in 2019, it was found that the percentage of adults with outstanding loans increased to 33% from 22% in 2017.
Most of these loans are made from informal sources, such as friends, relatives, and lenders. The report also discovered that the loans are used for basic needs such as food and utilities.
Informal lenders are popular because they accept non-traditional forms of collateral or even none at all. This, however, may lead to predatory lending. The practice imposes unfair and abusive loan terms to borrowers, such as high-interest rates and fees. In the Philippines, some lending and financing companies charge as much as 2.5% interest per day, among other fees. The 5-6 arrangement may have interest rates of 20%.
Xendit, the simplest and most trusted name in digital transactions in the region, recently launched PayLater, a cardless credit program that allows users to safely and effortlessly avail of small loans when making online purchases.
PayLater offers an option where customers can buy big ticket items and pay it on an installment basis. This new feature is made possible with Xendit’s partnership with BillEase, a financial technology company that gives flexible credit options with minimal interest rates.
The service is simple to use, for customers just simply select the PayLater option upon checkout of their online purchases, choose one of the installment plans, and confirm their purchase via a one-time PIN, while merchants who want to offer this service, just integrate with Xendit's APIs, and soon, via eCommerce plug-ins (Shopify, Wix, WooCommerce, Magento)
Billease is just the first reputable lender that has been vetted and accredited by the Xendit ecosystem, with more PayLater channels to be made available in the coming year. Their credit limit increases as they continue to purchase with PayLater and settle their accounts on time. In addition, Billease reports good credit behavior to partner bureaus like the Credit Management Association of the Philippines and TransUnion.
PayLater also benefits businesses selling high-value items online, which may be difficult due to low credit card penetration in the country. It helps those struggling to recover sales amid the pandemic by augmenting their cash flows with full sales proceeds, net of a small percentage fee.
Apart from making loans simpler and more accessible to Filipinos, PayLater aims to curb predatory lending. Securities and Exchange Commission chair Emilio Aquino notes that “predatory lending continues to be one of the major subjects of complaints that the commission receives from the public.”
With PayLater, Xendit hopes to create more avenues for customers to pay with digital credit lines without having to turn to predatory lenders. At the same time, it aims to protect vulnerable Filipinos who may not have access to traditional banks, or build a payment history and establish a credit score.
Helping the Philippines in its digitalization journey
PayLater is just one of Xendit’s services to fulfill its goal of helping build the Philippines’ financial infrastructure. As digital transactions continue to rise in the country, Xendit offers a technically advanced yet user-friendly process that allows businesses of all sizes to easily send and accept payments.
“PayLater, through the help of our partners such as BillEase, allows us to expand our services and offer the simplest online payments solutions, so we can continue helping more Filipinos,” says Yang Yang Zhang, Managing Director of Xendit Philippines.
