By accelerating digital transformation in the Philippines, the COVID-19 pandemic was an unexpected ally in the national drive to full financial inclusion. As the country emerges from the crisis, the question becomes not if but when and how the financial sector can play a larger part in the economic rebound.
The statistical story
The United States, G7 and United Kingdom have all coined variations on a phrase that promises to “build back better” after the worst effects of the pandemic. Whereas each of these wealthy nations has the advantages of first-world economies, we in the Philippines can realize our own version of this promise to our people and economy.
Before we explore the opportunities, let’s look at some of our challenges. TransUnion’s research project of March 20211 gave a stark indication of the difficulties faced by consumers and small businesses. Of survey respondents:
93% said the pandemic had negatively affected them
88% expressed insecurity about their ability to pay their bills
45% of people had lost jobs
24% of small businesses closed
These are devastating statistics, but they don’t tell the whole story. For that, we have to balance the above with positives recorded by the same study which indicated:
90% were confident about a bounce back in the economy
47% had sufficient savings to see them through the downturn
44% felt able to rely on the support of family and friends
17% were applying for loans from financial institutions
Apart from the encouraging note of resilience and optimism, we also see a sense of community, financial responsibility, and willingness to engage with the financial sector to cope with the crisis.
Scoring with credit
Resilience, resourcefulness and a positive attitude are essential ingredients for any nation to capitalize on the opportunities of a post-COVID era, but they’re not enough in and of themselves. To fully realize our economic potential, individuals and businesses need the bridging support of credit and loans.
The willingness of a lender to extend credit depends upon several factors summed up in a credit score — aggregated information outlining the financial activities of a person or organization. It’s the data lenders use to assess risk and extend credit terms with a measure of confidence.
Around 33% of Filipinos don’t know what a credit score is and are therefore disadvantaged when applying for credit and loans.
Part of TransUnion’s mission is to foster financial literacy, and we’re pleased to report a significant uptake in requests for personal credit scores in recent months. This suggests more people are recognizing the value of building a favorable credit profile and becoming more viable as potential recipients of credit and loans.
Increasing risk appetite
The increased availability and acceptance of digital platforms have boosted financial and behavioral data. When aggregated, analyzed and trended, this data gives a highly accurate view of the current and future creditworthiness of consumer segments, cohorts, individuals and businesses. The insights of this rich data can provide lenders with the confidence to extend credit and loan facilities to broader — even previously underbanked — sections of the population.
Responsibly extending credit will help expand financial inclusion and boost economic activity. It can also increase business and the profitability of banks and lending institutions when coupled with the supporting strategy of regular portfolio reviews.
The higher the frequency of credit portfolio reviews on businesses and individuals, the greater the opportunity to spot positive or negative trends early, leading to new marketing opportunities or managing potential delinquencies. Such insights from comprehensive quality data can help acquire and retain customers, build loyalty and grow the economy.
Striking the balance
We need to balance the rewards of responsible risk-taking and credit allocation against the dangers of fraud for both parties. Lenders can fall foul of fraudsters and consumers can suffer from identity theft. (Online fraud increased 31% after the pandemic and 40% of Filipinos were victims of phishing attacks.) Fortunately, the TransUnion tools that help enhance data and verify genuine customers can also spot anomalous behaviors and block fraudulent activities — protecting both parties.
Funding the future
Individuals and businesses in the Philippines are ready, willing and able to play their part in the post-COVID bounceback. At TransUnion, we believe the time is right for banks and lenders to follow this trend — by leveraging the consumer insights and fraud-fighting power of digital data — and extend their lending.
To discover and develop your credit score with TransUnion, click here.
To see how TransUnion can help you swiftly and securely extend your credit and loan activities, click here.
Pia’s TV interview with ANC News Insight:
Pia’s TV interview with ANC Market Edge (begins at 9.21):
1 Consumer Pulse Survey, March 2021