BANKS should develop more affordable products as unserved and underserved Filipinos expect their need for credit to increase in the coming years, which, a study conducted by information solutions firm TransUnion Philippines showed.

TransUnion’s study titled “Empowering Credit Inclusion: A Deeper Perspective on Credit Underserved and Unserved Consumers” surveyed 1,008 unserved and 964 underserved consumers in the Philippines.

Unserved consumers are defined as any adult person who has never had an open traditional credit product, while underserved refers to those have minimal credit participation, limited to a single type of credit product and no more than two open accounts of that type, and have been active in the credit market for at least two years.

The online global survey included responses from 11,128 adults and was conducted from Aug. 3, 2021 to Jan. 5, 2022 in partnership with Qualtrics Research Services.

“These credit-disadvantaged consumers are often unable to access financial products and services because they have no or little credit history. This study served to better understand how many people are truly under- or unserved from a credit perspective, while also determining paths for them to gain more credit opportunities,” TransUnion Philippines Regional President and Chief Executive Officer Pia L. Arellano said at a briefing on Tuesday.

Ms. Arellano said personalized, affordable and relevant products will allow financial institutions to capitalize on this growing demand for credit from the unbanked and underbanked.

“There’s a sizable market potential. A lot of our vendors are now in recovery mode and they do want to grow. But again, we have to increase the size of the pie. And how do you increase the size of the pie? It’s by tapping the unserved and underserved market,” she said.

The survey results showed that despite a lack of credit experience, the unbanked and underbanked understand the benefits and risks of taking on credit.

Half of unserved (51%) and underserved (52%) Filipino consumers expect their need for credit to increase in the next three to five years.

However, they said they are not satisfied with products in the market and other reasons for not wanting to take out loans, Ms. Arellano said. 

According to the study, not wanting to incur debt was cited by 53% of unserved and 52% of underserved consumers as the reason they don’t take on more or any credit. Some 40% of underserved consumers also cited their concern over losing control of their finances.

“This implies that a majority of consumers are looking to gain more access to credit and leverage credit for their financial needs,” TransUnion said in a press release.

Survey findings also showed 32% of underserved consumers in the Philippines would take on more credit if they can make lower weekly or monthly payments.

High interest rates were the most mentioned reason by both unserved (22%) and underserved (36%) consumers for rejecting credit offers.

Customer experience also causes consumers to reject a credit offer. The lengthy approval process was cited by 17% of unserved and 8% of underserved customers in the Philippines. — K.B. Ta-asan