Now more than ever, the modern economy runs on credit. Credit offers purchase options for businesses and consumers, and alternatives to impacting cash flow. It can help bridge the gap between unpredicted necessities and unavailable funds. Credit fuels opportunities — from minor items in a grocery basket to clothing, entertainment, furniture, business tools and equipment to the considerable expenses of a car or even property.
At least it does for those of us fortunate enough to have generated a financial footprint — a trail of measurable, credible, validated and formal credit activities and repayment behaviors that banks and lenders can use to help them assess the risk of extending credit.
And credit is just one benefit of financial inclusion; others include access to medical services and life insurance products to protect the well-being of family and loved ones, plan for retirement, and invest in the long-term aspirations of education for one’s children.
Too many Filipinos are excluded from these benefits because they lack financial visibility. Also because they live and work in the informal economy where employment is sporadic, and most everyday payments are cash-based.
We need to help bring the unbanked into the formal economy, leveraging the massive value of their diverse contributions to it and broader society, and foremost to help realize their aspirations. Fortunately for all Filipinos, we’re moving in the right direction.
Digital banking opportunities
Digital banking creates more opportunities for financial inclusion. The BSP cited an increase in basic deposit accounts, and the activation of ewallet services resulted in around 20 million Filipinos onboarded to the formal financial system between 2020 and Q3 of 2021.
Alternative data sources
Where traditional data from financial institutions isn’t available to give financially ‘invisible’ Filipinos a credit score, TransUnion leverages technology and innovation to enhance alternative data — including publicly available data from mobile phones and devices. Around 70% of unbanked adults own mobile phones in the Philippines. Each device contains a wealth of data we can analyze to generate creditworthiness, affordability and behavioral insights that can open opportunities for consumers and lenders to engage.
Based on these alternative purchasing and repayment insights, we can provide credit scores to help formal lenders verify an applicant’s creditworthiness and assess the financial risk of extending loans, credit and insurance products to previously unbanked consumers.
One reason Filipinos forego financial services is a lack of awareness. As a global information and insights company, TransUnion is intent on helping build trust between businesses and consumers so they can achieve great things. One expression of this is the credit information and education campaigns we produce to help consumers appreciate the value of a good credit score and how proactively monitoring, managing and improving their credit scores can make them more eligible for better credit offerings.
Just as no genuine consumer intentionally defaults on a loan, no responsible lender will extend credit without assessing the risk. The updated CreditVisionTM Link Universal Score and Custom Scorecards leverage traditional and alternative credit data to enhance risk decisions and understand consumer trajectory, whereas digital onboarding technology simplifies processes to increase acquisitions while safeguarding against fraud.
Although much has been done to drive broader financial inclusion, there’s still much to do. Financial institutions and other businesses must help increase awareness. Government must continue to work with the private sector for financial literacy and digital skills-building. Internet access and infrastructure need to be developed to ensure the advance of digital finance access.
With these measures, I’m confident more Filipino consumers can become credit visible, and we’ll see the benefits in our households, businesses, economy and nation.
* The Bangko Sentral ng Pilipinas (BSP) in 2019