Young consumers are driving the credit card business in the Philippines, a TransUnion study showed, with originations — the multistep process starting with applications and ending with approvals — having more than doubled over the past five years.
"The credit card market in the Philippines will continue to experience growth as demand remains high, especially among younger consumers," TransUnion Principal of Research and Consulting for Asia Pacific Weihan Sun said.
"Younger generation of Filipinos, particularly Gen Z, are quickly emerging as a cornerstone for future market growth [and] this generation places a higher importance on accessing credit and lending products to achieve their financial goals," Sun added.
TransUnion said that total originations among Generation Z Filipinos had more than doubled over the past five years, rising from just 9.0 percent in the third quarter of 2019 to 22 percent in the third quarter of 2023.
Younger Filipinos also constituted a larger portion of new-to-card borrowers — individuals obtaining their first-ever credit card — comprising one-third or 33 percent of all such borrowers last year.
TransUnion said the trend was an opportunity for lenders to engage with an expanding market of new-to-card consumers.
It added that the growth could be attributed, in part, to value-added services like reward points, installment options and discounts.
"While it's an important factor for potential growth opportunities among lenders, bringing new-to-card consumers into the formal financial system can also drive greater financial inclusion by catering to a larger demographic of borrowers," Sun said.
TransUnion also said that nearly all surveyed Gen Z Filipinos — 98 percent — viewed access to credit and lending products as crucial for achieving their financial goals.
They were also identified as among the most diligent in monitoring their credit status, consistently seeking out the best available offers.
As more Gen Z consumers enter adulthood, Sun said that their share of the credit market would continue to rise.
TransUnion also noted that the Philippines' credit card market was steadily growing, driven by opportunities to enhance financial inclusion.
The number of outstanding credit cards was said to have risen from 9.3 million in the fourth quarter of 2022 to 11.2 million a year later.
The credit card penetration rate — the percentage of adults with at least one credit card — surpassed 15 percent.
Credit card spending also surged by 39 percent to P853 billion in the first half of 2023, up from 29 percent the previous year.
"The trends in card originations, total volume, penetration and spending all indicate a promising growth trajectory for the credit card market in the country," TransUnion said.
Source: Business World
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