Banks’ credit card receivables post double-digit growth as of July

CREDIT CARD receivables of banks operating in the Philippines posted double-digit growth as of July amid the economy’s continued recovery and growing consumer demand for digital products, the Bangko Sentral ng Pilipinas (BSP) said on Monday.   

BSP Governor Felipe M. Medalla said in his speech during the anniversary event of the Credit Card Association of the Philippines (CCAP) that the growth reflects the collaborative efforts of the credit card industry to ensure a resilient and stable financial system.

“Despite a challenging operating environment, the credit card industry managed to grow its portfolio in a prudent manner. Credit card receivables have started to post double digit growth in 2022, reaching 20.4% year on year in July 2022,” Mr. Medalla said.

He added that the nonperforming loan (NPL) ratio of the industry peaked at 10.1% in November 2020. Latest data from the central bank showed the share of nonperforming credit card receivables in total NPLs stood at 6.76% as of end-June.

BSP Deputy Governor Chuchi G. Fonacier said in a separate speech that the resilience of the industry can also be seen in the double-digit growth of credit card billings.

“Credit card financing has been slowly gaining momentum in line with resumption of economic activities,” Ms. Fonacier said.

She said credit card billings rose by 41.4% annually in June, higher than the 29.5% growth in the same period in 2021.

“The credit card industry has also been at the forefront of extending the BSP’s temporary relief measures to individuals or businesses affected by the COVID-19 (coronavirus disease 2019) crisis,” Ms. Fonacier said.

“Apart from keeping finance charges within the BSP’s ceilings on credit card transactions, the industry led the way in restructuring credit card receivables,” she said.

Majority of restructured consumer loans were credit card receivables worth P6 billion as of end-July, comprising a 56.3% share, Ms. Fonacier said.

“We likewise appreciate the active engagement of CCAP in the BSP’s initiatives, particularly in the regular review of the credit card ceilings. The inputs and feedback of the credit card industry form part of the BSP’s holistic assessment of the appropriateness of the credit card ceilings,” she added.

The central bank earlier imposed an interest rate cap on all credit card transactions to ease the burden of consumers and enterprises affected by the COVID-19 pandemic.

The interest rates or finance charges on the unpaid outstanding credit card balance of a cardholder were capped at 2% per month or 24% per year.

“With demand for digital financial products increasing, there is still a lot of scope for growth in the credit card industry,” Ms. Fonacier said.

“Rest assured that we will continue to work closely together towards the achievement of our shared objective of promoting access to consumer credit through a safe, secure and reliable credit card industry,” she added.

SIM REGISTRATION LAW
Meanwhile, the mandatory registration of all subscriber identity module (SIM) cards in the Philippines will help lessen credit card fraud and eliminate barriers to digital transformation, the BSP and the CCAP said.

“Similar to the call of CCAP, we likewise support the SIM Card Registration Act, which intends to deter the proliferation of SIM card aided crimes such as bank fraud and text scams,” Mr. Medalla said.

“The rampant activities of fraudsters and scammers are compelling reasons for the passage of safeguard registration,” he said, adding that the central bank will continue to work with the CCAP in raising awareness and in protecting consumers.

The SIM Card Registration Act requires buyers of SIM cards to register prior to activation, while those already in circulation will be deactivated unless registered within a set period. The law penalizes the use of false or fictitious information and identities and the use of fraudulent documents in SIM card registration.

There are more than 120 million mobile subscribers in the Philippines, where scams using links in text messages have been rising.

“CCAP has been privileged to have been given the chance to share with the BSP that the clickable links are not the problem, but the people who maliciously use them,” CCAP Chairman Rolando P. Ebreo said.

“With the SIM registration law, we are set, as a nation, to combat that malice and to once again add a layer of protection for our Filipino consumers. It will help mitigate, if not prevent, scam messages that contain links used to lure the victims into giving out their information,” Mr. Ebreo said.

CCAP Executive Director Alex Ilagan said they continue to work with different government authorities to ensure the well-being of their customers.

“Initiatives that ranged from events that focused on the responsible use of credit cards, lobbying for the protection of consumers from smishing attacks, and pursing our strong position on SIM card registration are some of the highlights of the past three years,” Mr. Ilagan said.

He also encouraged more credit card businesses to share best industry practices and engage with the BSP regularly on emerging issues.

The industry should also develop consumer education programs to create awareness on the benefits and risks of using credit cards, he said.

“As the effects of the pandemic linger, CCAP and its members will continue to work together in offering more liberal debt restructuring or forbearance programs to allow cardholders in financial distress repay their obligations and regain good credit standing,” Mr. Ilagan said.

“We look back now and see that the challenges we faced also provided us the opportunity to learn more on how we can be a stronger organization to help our fellow Filipinos,” he added. — K.B. Ta-asan