By Lourdes O. Pilar, Researcher

(A Q&A with TransUnion Philippines)

It was in 2011 when the country’s five large domestic and foreign banks — BDO Unibank, Inc., Bank of the Philippine Islands, Citibank Philippines, Metropolitan Bank & Trust Co. (via its then-credit card subsidiary Metrobank Card Corp.), and Hongkong and Shanghai Banking Corp. (HSBC) — teamed up with Chicago-based credit information management firm TransUnion to set up the country’s first international private credit bureau TransUnion Philippines.

TransUnion is one of the three “special accessing entities” that can currently access data from state-led Credit Information Corp., the country’s centralized public credit registry. Modern credit bureaus such as TransUnion Philippines feature information regarding how individuals are maintaining their loan payments, which in turn can provide them with access to more financial products at potentially competitive rates.

TransUnion has partnered organizations such as banks and other financial institutions that contribute information, with the most recent one being that of 1 Cooperative Insurance System of the Philippines, a federation of about 3,000 cooperatives and its partner systems integration form TraXion Tech. As of July, the credit bureau and information solutions provider has 27.28 million account records in its database, up by around 8.8 times from the baseline data of 3.1 million records in 2012.

This article features TransUnion President and Chief Executive Officer Pia Arellano, who took the time to answer our questions regarding the company, the state of credit reporting in the country, and the significance of credit information to individuals and firms.

In what ways did TransUnion contribute to the development of the Philippines’ credit information system?

TransUnion started in 2011 in the Philippines by five major banks (BDO, BPI, Metrobank, Citibank, and HSBC). In the decade since TransUnion’s establishment in the country, we have expanded our information database and launched several solutions that have helped lenders understand their customers better so that they can make better decisions. Our solutions have provided scoring and insights capabilities that has helped the financial industry in managing their portfolios and extending credit to more borrowers, increased the safety and convenience of transactions while promoting digital transformation, and since 2020, have supported our members in managing the impact of the pandemic in the credit market while encouraging the transition into a growth mindset as we move towards recovery.

The country currently has three credit bureaus authorized to access credit data from the Credit Information Corp. How do these credit bureaus (including yours) differentiate each other in terms of offerings?

Each credit bureau has their own database of information that helps clients know more about consumers. Where TransUnion differentiates itself is in the quality and scope of our data, which has a threshold of 96% in data quality standards. This means that our data is both accurate and frequently updated so that our members can be confident that the information they’re seeing is an accurate representation of their consumers.

TransUnion’s high data quality also supports in our solutions’ processes. For example, our fraud prevention solution TruValidate can instantly establish a consumer’s identity by cross-referencing information across our database. Similarly, our CreditVision Risk Score solution is able to better predict future payment behaviors of a consumer by identifying trends in their past financial behaviors in our database.

Which entities usually avail of your credit reports? 

Financial services companies such as banks avail our credit reports every day. Rural banks, cooperatives, fintechs, and small money lenders also avail our credit reports and solutions every day.

How would you characterize the demand of these credit reports as well as the other services that you offer?

TransUnion’s credit reports and solutions are in high demand due to the convenience and rich insights that they provide to our members. This allows them to better understand their customers, resulting in higher acquisition volumes, protections against fraud, controls and decrease in delinquencies, advances in digital transformation, and more advanced insights to better manage their portfolio especially during the pandemic.

What are the persisting challenges that TransUnion is facing in obtaining credit information?

We are constantly expanding our database for alternative sources of data so that we can accurately represent even the unbanked consumers of the Philippines, which comprise a majority of the country’s population. This is part of our nation-building efforts to expand financial inclusion in the country so that everyone can have access to the financial services that they need to take their lives to the next step regardless of their current standing.

Although we have scoring solutions such as CreditVision and key partnerships with institutions that have alternative data sources, this effort is going to continue to be expanded, refined, and developed due to the vast majority of the adult Philippine population being either unbanked or using unofficial channels for their banking/borrowing needs. This challenge is something that we foresee will continue to persist for years and years to come, but one that is worth continuously tackling due to the greater benefits that it provides consumers.

In the years since you started operations in the country, what improvements did your firm see with regard to the ease of accessing credit information? 

A lot of entities within the financial services industry have relied for so long on traditional processes and technologies when it comes to assessing the creditworthiness of consumers and in managing their portfolios. But over the years since TransUnion’s establishment in the Philippines, a lot of these entities (including major players in the banking industry) have seen improvements in decreasing their delinquency rates, expanding market share for various tradelines (cards, auto, mortgage), increase in approval rates and acquisition, and significantly decreasing decision times for loans by as much as 75%. These were made possible not just because of TransUnion’s bureau data, but also because of the thought leadership collaborations that we frequently do with our members.

In what ways did the coronavirus pandemic affect your operations as well as the demand of these credit reports?

TransUnion’s transition into work-from-home arrangements was quick and enabled us to operate in a business-as-usual capacity without much interruption going on a year and a half now since the lockdowns began in March of 2020. Most of 2020 was spent prioritizing portfolio management and digital transformation for our members so that TransUnion can provide insights on the health of our members’ portfolios as the profound impact of the pandemic and lockdowns on the consumers’ financial behaviors and to the economy was ever evolving. This meant a general increase in demand for more information and insights about the consumers which is still felt today as TransUnion continues to encourage lenders to do frequent portfolio reviews in conjunction with our value-added services such as CreditVision Risk Score so that lenders can properly track and assess the shifting status of their customers’ financial standing.

The key difference between last year and with 2021 is that we are now moving forward to a cautious return to lending mindset that promotes growth in customer acquisition, which all but stopped at the beginning of the pandemic last year. We now have a better understanding of certain financial behavior trends and the pandemic’s impact to consumer’s finances thanks to TransUnion’s solution offerings and in our reports like the quarterly Consumer Pulse survey (See first and second quarter report findings on the pandemic’s impact to consumer finances in this page:

Now let us go to the scores themselves. Please explain to our readers how their credit scores are calculated.

In general, a consumer’s credit score summarizes what a person’s current financial situation at a certain time (most recently) is like. Certain attributes of a person’s financial situation are taken into consideration to calculate their credit score: What types of credit do they use (credit card, personal loan, auto loan, etc.)? Are they consistent in paying back their loans in a timely manner? What, if any, outstanding obligations do they have, and how well are they managing to pay it back? Do they pay in full or rely on minimum monthly payments? What recent enquiries did they make (example: did they apply for credit cards in multiple banks on top of their current tradelines? Are they applying for another loan? Etc.) All of these are assessed and result in a credit score that accurately reflects a person’s ability to repay their loans.

What should your clients look for in the credit report? How should they use it?

We recommend the following page that details each component and information that a person will find in their TransUnion credit report:

How do you weigh the impact of “negative information” in one’s credit score? How about “positive information”?

Though TransUnion’s scoring model is proprietary, we emphasize that if a customer currently has a poor credit score due to certain payment behaviors, this does not mean that it will stay that way forever (see my answer in the next question for details). There are steps that a customer can take (or maintain if they have good credit standing) outlined below to improve one’s score.

How does one make use of the information detailed in your credit report? Can you illustrate some use cases?

Understanding and managing one’s personal credit information can help you access financial opportunities that can lead to a higher quality of life. If, for example, your credit report illustrates frequent delays in loan repayments and a spending behavior that frequently exceeds your capacity, this is a sign that one should set strict budget goals to fix your current situation. The better you manage your finances and loans, the higher your credit score will be, which could lead to getting offered better interest rates on your loan application and/or higher credit availability (such as a higher credit limit on a credit card) based on the assessment of the lender using TransUnion’s credit report.

What security measures have you put in place to ensure the protection of credit information in your system?

TransUnion maintains high compliance with global cybersecurity and InfoSec (information security) standards in our systems through frequent system updates and upgrades so that we can continue to be our members’ Trusted Advisor.

What other offerings should we look forward to in the months to come?

Right now, we are augmenting our current direct to consumer platform that will allow more consumers to request for their TransUnion credit report. These credit reports provide consumers with information and knowledge about their total accounts to date and reviewing such is essential to ensure they are accurately being represented in the marketplace so that they have access to financial services and opportunities. We are also developing a premium credit report that combines both TransUnion and CIC data to give both our members and consumers a more comprehensive view of their account history to date.