Pinoys spending more time on lending apps

Filipinos spent about 1.3 billion seconds – equivalent to 42 years – using digital lending applications in 2023, with financial tools and credit services becoming more accessible to consumers, according to a study conducted by consumer credit service Digido.

The average user of digital lending apps spent around 14 minutes and seven seconds per month in 2023 while the average duration of a user’s session was 54 seconds.

Around 63.4 percent of that time was spent on platforms offering personal loans, followed by “point-of-sale” and secured loans at 17.5 percent, “buy now, pay later” (BNPL) services at 16.6 percent and installment loans at 2.5 percent.

The analysis included 70 online lending applications that are duly-registered to operate in the Philippines.

“Duly-registered digital lending applications continue to be viewed as trusted financial partners for persons in need of accessible formal credit, especially the underserved market,” business development manager Rose Arreco said.

“The increased use of apps offering personal loans also affirm Filipinos’ growing preference for digital channels and flexibility when utilizing credit,” she said.

The study also showed that user activity in all 70 apps rose by 37 percent in 2023 compared to 2022.

The number of downloads for online lending apps stood at 89.66 million units in 2023, 52 percent higher than a year ago.

Unique users surged by 64 percent to 47.46 million in 2023, while active users jumped by 25 percent to 7.7 million from the same comparative period a year before.

Interest in digital lending would continue to remain very high and stable amid further collaboration within the fintech industry to make its products and services even more accessible.

“The high percentage of Filipinos with limited access to traditional financial services, combined with the growing demand for formal credit options in the current macroeconomic context, led to more consumers turning to various lending options, especially ones offering personal loans,” Arreco said.

“Such platforms are reaching more low-income segments of the population through new technologies or partnerships with banks,” she added.

Personal loans were the most popular formal credit option, with 54 percent of survey respondents having one in 2023 due to its flexibility and variety of use.

Meanwhile, BNPL was the second most popular type of formal loan at 12 percent last year.

Source: Business World

Bridging the banking divide: The rise of e-wallets in the Philippines

Not so many years ago, Filipinos had to visit bank branches or ATMs to transfer money and manage their accounts. A complex set of geographic and institutional barriers, including the fragmentation of Filipinos across over 7,000 islands, and low levels of financial literacy, are also hampering the use of financial services.

Digital wallet usage around the world

The meteoric rise of e-wallets in the Philippines has transformed the way financial transactions are made, enabling anybody with a smartphone to electronically send, receive, and save money. By 2025, the country is expected to surpass 80 million registered e-wallet accounts, reflecting a threefold increase within five years.

This rapid growth can be attributed to several important factors, such as the successful advancement of digital transformation, widespread mobile adoption, favorable regulatory policies and forward-thinking government investments in talent and innovation.

The Philippines also has a large, young, and increasingly tech-savvy, population that is more receptive to adopting new innovations. With an internet penetration rate of 73 per cent, Filipinos are increasingly leveraging online platforms for a range of activities, from social interactions to shopping and entertainment.

This comfort with digital platforms has translated into a willingness to adopt e-wallets for financial transactions, appealing particularly to those previously excluded from the traditional banking system. This, in turn, has contributed to the emergence of numerous commercially successful e-wallet platforms, attracting millions of users and laying the foundation for a promising economic outlook for the country.

The benefits of digital wallets

The surge in e-wallet popularity underscores the real demand to address the unbanked population and bolster financial inclusion, fundamentally reshaping the lives of millions of individuals. This development holds significant implications for the Philippines, where 44 per cent of the bankable population remains unbanked, with rural areas, in particular, facing underservice and limited access to physical banks.

E-wallets not only attract those without traditional bank accounts but also appeal to a wide range of consumers, offering a host of great benefits. These include cost-effective transactions with lower fees compared to traditional banking services – a particularly beneficial advantage for small-value transactions.

In countries like the Philippines, where remittances from overseas workers are substantial, e-wallets also provide a faster and more efficient way for people to receive money from abroad. Additionally, the adoption of e-wallets promotes the digitalization of payments, reducing reliance on cash and enhancing overall economic efficiency.

Furthermore, e-wallets offer enhanced security features such as PIN codes, biometric authentication, and encryption, mitigating the risk of theft or fraud associated with carrying physical cash.

They also provide access to credit and other financial products, including loans, insurance, and investment options, expanding financial services for users. For small businesses, e-wallets enable easy acceptance of digital payments, fostering economic growth and reducing reliance on cash-based transactions, which can be crucial for a thriving SME/MSME economy.

Other perks include loyalty programs, cashback rewards, and discounts, incentivizing users to adopt digital payments and promoting customer retention. Moreover, e-wallets can be integrated with government initiatives such as social welfare programs and subsidies, facilitating the efficient disbursement of funds to beneficiaries.

Fintechs driving innovation

With so many consumer benefits on offer, the success of e-wallets seems assured – but the timing is also ripe for fintech innovators to break into the Philippines and contribute to shaping the country’s digital future.

Here’s why.

Firstly, the regulatory environment in the Philippines is conducive to fintech innovation. The Bangko Sentral ng Pilipinas (BSP), the country’s central bank, has implemented forward-thinking policies to support the growth of digital financial services.

These include regulatory sandboxes for fintech innovation, which allow companies to test their products in a controlled environment before wider market access.

Additionally, the BSP has issued guidelines for electronic money issuers (EMIs), ensuring the integrity and security of digital financial transactions while providing a clear regulatory framework for e-wallet providers.

Technology advancement

The Philippines is also experiencing significant technological advancements, particularly in mobile internet infrastructure. The widespread availability and affordability of smartphones, coupled with improvements in internet connectivity, have democratised access to digital financial services across the country.

These advancements enable individuals, even in remote areas, to participate in the digital economy through e-wallets, facilitating various transactions such as remittances, bill payments, and purchases.

Finally, technological innovations in e-wallet platforms, including advanced encryption protocols and biometric authentication methods, have enhanced security and built consumer trust in digital financial services. These developments contribute to the growing acceptance and adoption of e-wallets among Filipinos, further propelling the digital transformation of the financial landscape.

In conclusion, the rise of e-wallets in the Philippines is a transformative leap towards a more inclusive and accessible financial future. As technology continues to evolve and regulations adapt, e-wallets have the potential to empower individuals, revolutionize businesses, and unlock economic opportunities for millions.

In this sense, the case of the Philippines holds valuable lessons for other nations seeking greater financial inclusion in the digital age.

It also provides incredible opportunities for fintechs to contribute to the success of the nation by creating a more inclusive financial landscape for all.

Source: Fintech

Time a loan will tell: Where does bank credit go?

Do you ever wonder where bank loans go?

With financial conditions remaining tight, securing bank loans can be more expensive now than ever before for many Filipinos. Data from the Bangko Sentral ng Pilipinas (BSP) show that credit growth in the country has slowed since the start of the central bank’s aggressive tightening against inflation, although outstanding loans of the country’s big banks—excluding their lending with each other—managed to grow at a faster rate of 8.6 percent in February to P11.61 trillion.

If we consider the entire Philippine banking system, total outstanding bank loans amounted to a larger P12.57 trillion as of February.

“The reason for the underperformance of bank lending can be tied to elevated borrowing costs, showing clearly the negative impact of policy rate hikes on growth momentum,” Nicholas Mapa, senior economist at ING Bank in Manila, says in a commentary.

But, again, where does all that money go?

By major segments, latest figures from the BSP show 80.46 percent of these loans are extended to local businesses while 13.62 percent are secured by Filipino households.

Also, 3.34 percent of these borrowings are in the form of reverse repurchase agreements, or securities the BSP intends to buy back at a later date, while the remaining 2.58 percent is granted to foreign borrowers.

Broken down, domestic enterprises engaged in real estate activities corner 19.31 percent of total loans in the local banking system, taking the largest share. Coming in at second place are companies in the business of “wholesale and retail trade, repair of motor vehicles, motorcycles” with a 10.91-percent share.

Firms engaged in production of electricity, gas, steam and air conditioning supply take the third biggest slice (9.9 percent) of the credit pie, followed by manufacturers with a 9.74-percent share.

On the household level, credit cards account for 5.68 percent of the local banking industry’s total outstanding loans, while motor vehicle loans corner a smaller 4.07-percent share. Salary-based loans eat up 3.48 percent of the total credit.

Too much household debt?

For ING Bank’s Mapa, it remains unclear if the uptick in bank loans—despite stubbornly high inflation that’s beating household savings—is not a symptom of a creeping economic problem.

Mapa notes that loans to consumers have been surging over the past 24 months driven by “the stark increase in both credit card debt and salary-based loans.”

The rapid increase in lending to these sectors, he says, has resulted in consumer credit almost doubling from their pre-COVID levels, with the latest reading at P1.2 trillion from the roughly P587 billion prior to the health crisis.

“This may be viewed as a positive for some but the sustained increase in household debt at a time where savings rates are still well-below prepandemic levels could eventually be a worrisome trend,” Mapa says in a commentary.

Moving forward, the ING bank economist expects elevated borrowing costs to weigh on the economy, which may have a hard time hitting a 6-percent growth.

“Rate hikes have a negative impact on growth, and although we may still see growth remain positive, we can only contemplate how much higher our GDP (gross domestic product) growth would be had policy rates not been so restrictive,” Mapa says.

Source: Inquirer