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TransUnion Study Finds that More than Half of New-to-Credit Consumers in the Philippines Gain Access to Credit at First Application

  • Personal loans are the first product of choice among Philippine’s new-to-credit consumers, followed by credit cards
  • Filipino new-to-credit consumers are held back from leveraging credit due to fears of losing control of personal finances and debt levels, indicating opportunities for more financial literacy work
  • More than six in 10 new-to-credit consumers in the Philippines expect their need for credit to increase in the next three to five years

Manila, Philippines, June 15, 2023 New-to-credit consumers – those early in their credit journeys – in the Philippines and across the globe generally gain access to credit from their first application, and are satisfied with the amount of credit they receive. The study found that on average, over 60% of NTC consumers globally said their need for credit will increase in the next three to five years, with the highest levels in developing markets (led by India at 79%). Approximately 61% of NTC consumers in the Philippines stated their need for credit will rise in this same timeframe.

These and other findings from a newly released TransUnion (NYSE: TRU) global study, “Empowering Credit Inclusion: A Deeper Perspective on New-to-Credit Consumers”, give insights to lenders in both developed and developing credit markets on how to approach additional credit needs from new-to-credit consumers, as well as what these consumers value most in their loan providers.

The study included an online global survey of consumers in the Philippines Dominican Republic, Brazil, Canada, Colombia, India, the United States, and South Africa, as well as credit bureau data and insights about millions of new-to-credit consumers in varied global markets, including Canada, Colombia, Hong Kong, India, South Africa, and the United States. TransUnion defined a new-to-credit (NTC) consumer as one with no prior credit history on their credit bureau file who opened their first-ever, traditional credit product such as a credit card, personal loan or another loan type unique to individual regions. The study then examined the behaviors and performance of those new-to-credit consumers over the subsequent two years after opening their first credit product. 

“A particular focus around the topic of financial inclusion is credit inclusion – the ability of consumers to access traditional lending products, such as credit cards, personal loans and mortgages. These products serve as a means to financial mobility for consumers and can be a gateway to a better quality of life, enabling homeownership, business formation and wealth creation,” said Pia Arellano, president and CEO of TransUnion Philippines. “The more consumers who can participate in credit markets in a region, the greater the opportunities for broad economic inclusion. The data from our global study demonstrate that new-to-credit consumers are often good risks who are hungry for credit and will show loyalty to those financial institutions that offer them their first credit accounts.”

Over half of NTC borrowers get approved on the first application

The online global survey set out to understand the voice of NTC consumers, and included responses from 8,465 NTC consumers from a range of markets.

According to the study, among Filipino consumers surveyed, more than half (52%) said their first credit products were approved on their first applications, with 90% being satisfied with the amount of credit they received. A personal loan was cited as a first credit product opened by 50% of NTC Filipinos, followed by credit card as the next most common product opened. These products both offer liquidity to consumers, giving them flexible access to credit, which is likely a driving need for consumers entering the credit.

Other Filipino NTC consumers chose student loans, payroll loans and auto loans as their first products in building a credit profile.

The study found that new expenses were the primary driver for opening a first lending product in nearly all markets, excluding the United States and Canada, where having access to a convenient means of spending was the top motivator. In the Philippines, 57% of NTC consumers opened their first credit product in response to a new expense, and 48% did so to access a more convenient means of transacting.

The study also found that convenience is the top criterion in choosing a lender among NTC borrowers in all regions except Brazil, suggesting opportunities for lenders to tailor their products to capture the NTC segment. In the Philippines, 47% of consumers cited convenience as their top factor, with 23% saying that they chose an institution based on recommendations by friends or family.

Financial literacy key to unlock opportunities

The survey findings also indicated that 44% of NTC consumers in the Philippines would expand their use of credit if their payments were lower, with 40% saying that they would do so if better credit offers were available. A future life event – like getting married or having a child – would see 37% of Filipinos expanding their credit portfolio. In addition, 36% of Filipino NTC consumers would expand their use of credit if they received education about the availability and benefits of credit, and 34% would do so if they had more clarity on the total cost of credit, including fees and interest.

However, 46% of Filipino NTC consumers stated that they don’t want to expand their use of credit because they don’t want to lose control of their finances, while 44% said it was because they don’t want to get into more debt.

“These concerns may be due in part to their relative inexperience with credit, and limited understanding of their credit capacities and successful credit management behaviors. Empowering new-to-credit consumers with education tools around budgeting, credit monitoring and other facets of credit management can help build confidence and increase their understanding of credit as a useful tool for achieving financial goals and creating a better life,” said Arellano.

NTC Filipinos are embracing online financial services, with 67% completing up to half their transactions online, with a further 24% saying the same for between half and three quarters of their transactions. Of those that apply for a loan via a website or mobile app, 74% say that real-time approval is very important, demonstrating consumers’ expectations that lenders will have immediate access to their credit history, so that they can respond to applications expeditiously.

“New-to-credit consumers in the Philippines and around the world appear to have a need for credit to improve their lives, and understand the risks of taking on too much debt,” Arellano said. “At the same time, many Filipinos are held back from accessing credit because of their lack of financial visibility. Where traditional data is not available to give financially ‘invisible’ Filipinos a credit score, lenders can and should leverage alternative data such as telco data to help score consumers with little to no credit history. This will enable more people to be visible in the formal financial system and, on a greater scale, empower building a nation of well-informed consumers confidently making sound financial decisions to improve their lives.”

For detailed information about all global markets represented in the study, please click here.