Philippines Encouraged to Embrace Information-Powered Recovery and Improve Financial Inclusion

Global information and insights company TransUnion is encouraging businesses to envisage an information-powered recovery as the Philippines targets growth in an economy emerging from the impact of COVID-19. By ensuring that a consumer’s creditworthiness is accurately represented, financial institutions can expand their services to the unbanked and underserved.

Before the pandemic, the percentage of the Filipino population that was credit visible was increasing with growing momentum, and although it has continued to increase during COVID-19, the rate has slowed significantly. When COVID-19 hit, financial institutions shifted from a growth mindset characterized by increasing customer acquisition volumes, to a more cautious and reactive mode focused on managing their existing portfolios and ensuring that they didn’t become riskier as a result of the prevailing economic conditions and general uncertainty.

Unfortunately, developments on increasing the banked population and extending loans to entrepreneurs or consumers hoping to take the next steps in their lives (e.g., owning assets like property) were derailed or delayed by the pandemic. There are still tens of millions of Filipinos who aren’t credit visible and as such could have limited access to credit products and other services. However, as the country moves to recuperate from the economic impact of COVID-19, TransUnion believes that the key to recovery lies in regaining the growth mindset, backed by the power of information.

“Prior to the pandemic, financial inclusion in the Philippines had been increasing at pace. A greater volume of institutions sharing financial information had enabled more consumers to access a greater range of financial services and products. TransUnion’s priority when the pandemic hit was to ensure that services to our members and consumers remained business as usual even under lockdown, not only to honor our obligations but to really support them through the crisis. The whole situation was unprecedented, and it impacted our members and potential members differently. Now that the Philippines and the global economy is looking to the future, it’s important that everyone focuses on growth and joining together to help recovery efforts,” said Pia Arellano, TransUnion Philippines president and CEO.

In the modern economy, credit reporting agencies play a crucial role in enabling financial institutions with solutions to help identify trends and customer pain points, as well as understand credit history and predict likely future scenarios on the financial state of consumers and businesses. This helps lenders confidently make decisions, even in uncertain times, whilst more accurately predicting risk.

TransUnion, through its partnerships with various financial institutions like banks in rural areas, champions greater financial inclusion by bringing lenders into the wider credit information ecosystem. This allows consumers with previously limited data in the system (as a result of only interacting with lenders not previously sharing data) to be on the radar of both big and smaller banks looking to increase the provision of products and services. In the same way, lenders contributing data are also empowered to be more competitive in the industry because of the insights and technology solutions that they gain access to.

Old problems, new solutions

As the pandemic has continued, more challenges have surfaced for financial institutions. Prolonged lockdowns and subsequent rises in unemployment have affected people’s income and household finances and their capacity to meet credit obligations. While regulatory measures were put in place to manage the potentially negative impact on creditworthiness and, ultimately, individuals’ or businesses’ access to financial services, the situation called for innovative solutions that better respond to the prevailing challenges.

In addition, as people have had to live their life more online under pandemic restrictions, the demand for financial services that are obtained via digital platforms has shot up. Financial institutions have had to commence or accelerate their digital transformation efforts to keep up with both the sudden market demand and the competition from FinTech and other new players, all while dealing with the rise in attempted fraud cases during the pandemic, especially during its early days.

TransUnion’s contribution has been the introduction of new core solutions which tackle old problems that came in new forms during the pandemic. For instance, it started harnessing the power of trended data and additional variables/attributes that expand understanding of consumer credit behavior. These have enabled businesses to continue and even extend support to previously unbanked consumers. It also launched its seamless onboarding solution which provides financial institutions with transformative digital capabilities while helping mitigate fraud before it happens. Such support reaps benefits that extend even beyond the challenges of the pandemic.

“Our advocacy for re-establishing a growth mindset to aid economic recovery is underpinned by our promise that we can help create a reliable basis for mutual trust between lenders and consumers. At this point, our goal is to keep empowering financial institutions to solve old problems in new and better ways. This stems from the fact that TransUnion sees information not just for what it can do, but for what it can help people achieve. It’s how we plan to do our part in the bayanihan efforts to recover from this crisis as one nation,” Arellano said.

2020 forced shifts and developments in businesses, and 2021 is the time to focus on sustainable growth and greater stability. Implementing and streamlining strategies for the digital space remains a key focus and providing access to convenient digital experiences is now what consumers expect. While balancing risk is still necessary, a cautious return to rebuilding and lending to new customers is possible through informed decisions.

Arellano concludes: “It is a monumental task, but the Philippines has proven its capacity to bounce back from crises stronger than before. TransUnion understands its unique position to provide data-backed guidance and technology solutions to help businesses and consumers make more informed finance decisions during these uncertain times and contribute to nation-building and the country’s eventual economic recovery. Together, we can all succeed.”