By Victoria “NIKE” De Dios
It is undeniable that the pandemic has changed consumers’ behavior not just in terms of purchasing habits but also in utilizing the mode of payment options.
The advent of e-commerce platforms and online selling has provided options to consumers and it also paved the way to bring more players in the digital credit service providers and consequently propelled growth in sales in the booming e-commerce industry in the Philippines.
A study done by TransUnion’s Q1 2024 on Consumer Pulse Survey revealed that while almost all (96%) of Filipinos consider credit and lending products to be important factors in achieving their financial goals, greater access to credit remains an issue as only one-third of Filipinos (35%) believe they have sufficient access to credit and lending products. That is a noticeable decrease from 46% in Q1 2023. Comparing different generations*, Gen Z emerged as the group who said they had the least access to credit and lending products at 32%, followed by Baby Boomers (30%), Millennials (28%) and Gen X (26%).
The quarterly Consumer Pulse Survey by global information and insights company, TransUnion (NYSE: TRU), explores consumers’ recent personal finance and fraud experiences, and what financial changes they expect in the future.
Buy Now Pay Later sees increased usage among Gen Z
Born in a time of smartphones and social media, Gen Z Filipinos are tech natives who are comfortable carrying out transactions online with 88% saying that they have done so in Q1 2024. As more Gen Z Filipinos become part of the workforce, nearly all (89%) of them expected their income to increase in the next 12 months — the most of any surveyed generation.
Gen Z’s technological literacy and personal financial outlook appeared to contribute to a trend observed with Buy Now Pay Later (BNPL) services — an alternative credit-enabled payment method that allows consumers to immediately finance purchases and pay them back in fixed installments over a relatively short period of time. Among all Filipinos who said they have heard of BNPL (82%), almost two-thirds (63%) said they had made at least one BNPL transaction in the last 12 months compared to 61% in Q1 2023. However, among those in Gen Z who said they have heard of BNPL (81%), an even higher percentage (65%) said they made at least one BNPL transaction in the past 12 months. This is up from 57% in Q1 2023, the biggest increase among all generations. More than two-thirds (68%) of Millennials who claimed awareness of BNPL (86%) said they made at least one BNPL purchase in the same timeframe.
“It was easy to apply” is the top reason Gen Z said they used BNPL. Some of the other top reported reasons include they just wanted to try it (17%), spreading payments over time (11%) and as an alternative to afford a larger purchase (11%).
“For many Filipinos, Buy Now Pay Later services offer financial convenience and flexibility by letting them tailor their payment terms to best suit their needs and preferences. With the noted increase in usage of such services among consumers, especially the younger generation, businesses and other players in the formal financial sector must develop robust underwriting systems to efficiently cater to the expectations of an increasingly digital savvy demographic. This entails striking a delicate balance between capitalizing on the growing opportunities and mitigating potential risks in terms of operational efficiency and delinquency management,” said Weihan Sun, Principal of Research and Consulting for Asia Pacific at TransUnion.
Gen Z are credit-hungry and proactively seeking out ways to improve their credit
The act of credit monitoring has also increased with seven-in-ten (70%) Filipinos saying they checked their credit reports at least monthly – an increase of five percentage points from 65% in Q1 2023. This uptick reflects a growing awareness of the importance of credit health and its implications on financial opportunities. Millennials (75%) and Gen Z (74%) are the Filipino generations who said they checked their credit reports at least monthly, followed by Gen X (65%) and Baby Boomers (56%).
The percentage of Gen Z Filipinos who said they do not monitor their credit reports also fell to 14% from 17% in Q4 2023. Over the past year, the percentage of Gen Z Filipinos who said they do not monitor their credit reports fell every quarter — all the way from 29% in Q1 2023.
Among their reasons for regularly monitoring their credit reports, 30% of Gen Z did so to learn of any credit offers they might qualify for, while 34% checked to find ways to improve their credit score. However, both reasons are eclipsed by their need to protect themselves against fraud — a consideration shared by 55% of Gen Z Filipinos.
Younger Filipinos grow adept at spotting fraud attempts
As more Filipinos grow accustomed to transacting online, addressing fraud remains a challenge. Among methods employed by fraudsters, phishing — the deceptive practice of masquerading as a trustworthy entity in emails or via websites to steal sensitive information — was the most reported scheme (49%) among Filipinos who said they were targeted with online, email, phone call or text messaging fraud attempts in the last three months. Other common fraud methods reported were smishing (43%) — similar to phishing but conducted through SMS text messaging — and money or gift card scams — where victims are deceived into sending money or purchasing gift cards under false pretenses (36%).
However, younger segments of the population have shown a growing awareness for spotting scams and fraudulent tactics. The percentage of Gen Z Filipinos who said they were not aware of being targeted by fraudulent schemes in the last three months dropped to 28% from 37% last year.
“As technology advances, consumers now have access to a variety of payment options that cater to their preferences. Yet, alongside the growth of digital convenience comes the inherent risk of fraud. Although it is encouraging to see the increased ability of younger Filipinos to recognize fraudulent schemes, fraudsters remain relentless in their efforts to adapt and exploit vulnerabilities. These dynamics underscore the critical need for proactive fraud prevention strategies which encompass robust security measures and continuous consumer education by financial institutions. As more members of Gen Z enter the consumer market, implementing multi-layered defenses against fraud while ensuring friction-right customer experiences becomes crucial for the long-term success of all financial institutions in the country,” said Sun.
*TransUnion’s Q1 2024 Consumer Pulse Survey was conducted from 6 Feb. to 14 Feb, 2024, and involved 977 Filipino consumers aged 18 years and older. Generations are defined as follows: Gen Z, 18–26 years old; Millennials, 27–42 years old; Gen X, 43–58 years old; and Baby Boomers, age 59 and above.