PH financial assets posted fastest growth of 13.2% in 2023

The Philippines, among the less affluent economies in Asia, posted a 13.2-percent growth in net financial assets to 1,940 euros per capita in 2023, based on the 15th edition of the “Global Wealth Report” released by Allianz Global.

The report said the growth of the Philippines financial assets in 2023 was the highest in six years and led the region, outpacing China and India. It provided a comprehensive analysis of the asset and debt situation of households in nearly 60 countries.

It said that in the Philippines, the growth was driven by securities, which increased by 16 percent. Bank deposits and insurance/pensions also saw strong growth, but insurance/pensions remained underrepresented in Filipino portfolios.

Real growth, adjusted for inflation, was 6.8 percent, surpassing pre-pandemic levels. Liabilities also grew, leading to a debt ratio of 27.1 percent, which remained relatively low.

According to the report, 2023 witnessed a robust recovery in global financial assets, growing by 7.6 percent and reaching 239 trillion euros.

The recovery was widespread, with only New Zealand and Thailand experiencing negative growth.

Emerging economies, including those in Asia and North America, displayed growth exceeding 8 percent. However, the growth advantage of emerging economies over advanced economies shrunk considerably, signifying a more unequal world in the face of increasing fragmentation.

Financial assets of Asian households increased by 7.5 percent in 2023, totaling 63.8 trillion euros. While all asset classes contributed, bank deposits were the primary driver.

Source: Manila Standard

Mobile financial apps gain traction

Financial technology (fintech) adoption through mobile applications is likely to reach 80 percent or about 65 million users by the end of this year, an analysis from consumer credit service Digido showed.

Approximately 79.5 percent of Filipinos ages 15 and older — about 66.4 million people — are expected to use fintech through mobile apps.

The growth is expected to be driven mainly by digital commerce, contributing 34 percent, followed by digital wallets at 27.2 percent and digital banking at 8.6 percent.

"The positive numbers seen in digital lending, digital wallets and digital commerce can be attributed to growing trust in these segments and its natural synergies with one another," Digido Business Development Manager Rose Arreco said.

"As strong demand for fintech in the Philippines continues, so too Filipinos' expectations on convenience, interoperability and improved user experience across these applications," Arreco added.

Digido reported that 76.2 percent of Filipino adults (63.1 million users) adopted fintech services through mobile apps from September 2018 to June 2024, with fintech app downloads totaling 617 million.

Digital commerce led with 31.4 percent of downloads, followed by digital wallets at 21.7 percent, and digital lending at 20.3 percent. The remaining downloads were for digital payments and transfers (11.6 percent), digital personal finance apps (8 percent), and digital banking (7 percent).

In the first half of 2024, Digido found that digital lending saw the highest growth with 25.4 million downloads, followed by digital commerce at 13.5 million, and digital wallets at 12.2 million.

Digital payments and transfers, digital banking, and digital personal finance apps had 7.8 million, 6.2 million, and 4 million downloads, respectively.

Digido noted that, on average, downloads grow at about 10.26 percent every six months.

In the first half of 2024, digital banking saw the highest growth at 22.34 percent, followed by digital payments and transfers at 17.72 percent, and digital lending at 16.81 percent.

"We believe that the Philippines remains on course towards widespread digitalization, with its 'fintech-ization' far from weakening," Arreco said.

"Collaboration within and outside of the industry remains paramount for this growth to be realized at a faster rate," she added.

Source: Manila Times

BSP: Youth more financially literate

Young adults in the country are more financially literate than middle-aged and senior Filipinos, a Bangko Sentral ng Pilipinas (BSP) study showed, suggesting financial education programs should adapt to changing age priorities.

Using the 2018 BSP Consumer Finance Survey (CFS) as the primary data source, the central bank found that across the three age categories, young adults registered the highest financial literacy index of 0.742, higher than the middle-aged and senior cohorts at 0.656 and 0.623, respectively.

The nationwide triennial survey examines the financial state of households, covering financial and non-financial assets such as savings, investments, debts, real property, income and expenditures.

The 2018 CFS surveyed 14,860 households. However, for this analysis, the central bank only considered households with at least P10,000 in annual income and at least P1,000 in annual expenditure, resulting in a final sample of 7,084 households.

They categorized the respondents as young adults (18 to 39 years old), middle-aged (40 to 59 years old), and seniors (60+).

The BSP said that higher income slightly increases financial literacy levels, and respondents with at least a high school education have significantly better financial knowledge and skills.

It noted that young adults are more likely to spend equal to or less than their annual income, whereas spending more than their annual income is less common for this group.

In contrast, middle-aged and senior individuals are less inclined to spend equal to or less than their income compared to young adults.

"It is possible that the older age groups have larger expenses, such as food, education of children, medicines and other consumption needs of the household," the BSP explained.

Moreover, the central bank revealed that middle-aged individuals are less likely than young adults to have a loan-to-income ratio of less than 1, with which higher income levels also increase the likelihood of having a loan-to-income ratio below 1.

During middle age, BSP said that many people take out loans for significant purchases like homes, leading to higher loan-to-income ratios compared to younger adults. Those with higher incomes can borrow larger amounts due to their perceived ability to repay.

Furthermore, the central bank found that primarily young adults and middle-aged individuals have some form of deposit account with banks or non-bank institutions.

Among those queried, only 66 percent of these respondents disclosed the amount in their deposit accounts, and 79 percent revealed the amount of emergency cash they possess.

Most of the respondents who provided details about their accounts were in the middle-aged group (774 respondents), followed by the young adult group (759 respondents) and the senior group (270 respondents).

"We observed that in terms of the average amount of savings, the senior age group has the highest average amount of savings, followed by the middle-aged and young adult groups," the BSP said.

"The savings of the senior age cohort could include the lump sum payment that they received when they retired, retirement benefits and savings made over the years," it added.

The BSP observed that people's financial behaviors vary with age and life stage, influencing whether they prioritize short-term or long-term financial strategies, noting that there's a low importance given to retirement planning and saving.

"Financial programs and interventions could help address this issue by designing and implementing modules that focus on the value of planning for retirement," the BSP said.

It emphasized that as individuals age and progress through different stages of life, their priorities, preferences, economic status and financial circumstances can change; hence, these changes can significantly influence people's financial decisions and behaviors.

"Thus, such factors should be considered in the design of financial education programs to make them more effective and responsive to the needs of their target participants and learners," it said.

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Source: Manila Times