TransUnion Study Finds Major Gaps in Unbanked Filipinos’ Credit Knowledge

  • Survey of Filipinos shows a correlation between knowledge and trust in credit products, underscoring the importance of boosting financial literacy to bring more people into formal financial systems 
  • Unbanked Filipinos rate their knowledge of credit significantly lower than the general population 
  • Many Filipinos are held back by perceived stigma around credit, and most still rely on informal credit rather than formal credit systems, especially among the unbanked population 

Global information and insights company and the Philippines’ first comprehensive private credit reference agency, TransUnion (NYSE: TRU), today released an inaugural Credit Perception Index study on Filipino perceptions towards credit, factors contributing to their perceptions, and what these mean to the nation as a whole. The study aims to inspire meaningful dialogues and actions to improve credit literacy and financial inclusion at large for the Philippines. 

The TransUnion Credit Perception Index (CPI) for the Philippines currently stands at 65 out of 100. The CPI factors in how Filipinos see credit across multiple dimensions, including their current attitudes, knowledge, trust, favorability, and future receptivity. 

The study finds that most Filipinos surveyed (69%) have a general understanding of the concept of credit. Across credit products, they tend to be most knowledgeable about credit card installment payments (83%), followed by personal loans (77%), credit cards (71%), and Buy Now Pay Later (69%). In contrast, they are far less familiar with mortgages (58%), auto loans (54%), and overdraft protection (25%). 

Trustworthiness in different credit products also follows a similar pattern, with credit card installment payments (81%) and personal loans (78%) seen as being more trustworthy, and overdraft protection (42%) being less trusted among Filipinos surveyed. This suggests a likely correlation between knowledge and trust – the more knowledgeable a consumer is about a credit product, the more trustworthy the consumer would find the product.

In comparison with other financial products, Filipinos tend to favor cash (96%) and e-wallets (93%) over credit products such as Buy Now Pay Later (66%) and credit cards (59%). In fact, credit card penetration rates remain low despite longstanding presence in the Philippines, with only 25% of respondents owning a credit card. This is in sharp contrast to the 85% who have an e-wallet, which have only become available recently in comparison to credit cards in the country. The fact that credit cards are a more widely held product in many markets around the world yet remain stagnant in the Philippines in terms of penetration, may indicate a prevailing conservative attitude surrounding credit among the Filipino public. 

“Improving financial literacy among our fellow Filipinos is a major step in fostering a more inclusive financial ecosystem in the country,” said Pia Arellano, president and CEO of TransUnion Philippines. “We are passionate about the work we do every day to help wider consumers understand more about credit and enable them to access credit opportunities to achieve their life goals. By harnessing both traditional and alternative data to generate insights on an individual’s creditworthiness, it becomes possible for more consumers to be seen and included in the formal financial system, especially unbanked Filipinos constrained by the lack of available credit information on them.”

Filipinos’ Knowledgeability, Trustworthiness and Favorability in Credit Products

Unbanked Filipinos find themselves less knowledgeable and have less trust in credit 

The study also takes a deeper look at the credit knowledge and perceptions of the Philippines’ unbanked population. The CPI of the unbanked population is at 53, 12 points lower than that of the general population. 

The biggest gaps between the unbanked segment and the population as a whole are related to credit knowledge, as well as trust and favorability. Among the unbanked respondents, 58% said they understand the general concept of credit. However, on the knowledge of different credit products, the unbanked population scores themselves at 27 out of 100, significantly lower than the general population’s 54. The unbanked population also scores 39 (19 points lower) and 40 (14 points lower) out of 100 on overall trust and favorability, respectively. 

Negative Stigma Surrounding Credit Remains

Additional findings show that the notion of credit, or utang in Tagalog, is often associated with debt, overspend and irresponsibility among consumers in the Philippines. In fact, many among those surveyed believe people acquiring credit products tend to overspend (57%), or are already in debt (50%). Many also believe that these borrowers will eventually acquire unmanageable amounts of debt (45%) or will go to jail if they do not pay their debts (42%). 

Despite these perceptions, there is still a high level of reliance on informal credit rather than on formal credit systems. Nearly three quarters of Filipinos (72%) turn to family and friends to borrow money, and the percentage goes even higher to reach 78% among the unbanked population. 

Filipinos’ longstanding stigmas and perceptions of credit may be due in part to the sources of their credit knowledge. Most Filipinos learn about credit products from their family and friends (67%), followed by banks and financial institutions (61%) and financial advisors (42%). When looking at the unbanked population, apart from family and friends (69%), they rely mostly on Facebook (51%) and YouTube (45%) for financial education. 

“There is an enormous opportunity for the public and private sectors to work together to provide more formal and reliable channels for the Filipino public to acquire financial knowledge, and thus transform the conversations of credit seen as mere harm into a gateway to improved economic opportunities. It is not simply about understanding personal finances and credit, but more importantly, leveraging the power to access opportunities made possible by more informed financial decisions and responsible lending. Responsible credit use empowers consumers to realize their aspirations, whether that be starting a business, pursuing further education, or building a home. On a national scale, it also serves as a catalyst for economic growth, as proven by a great many economies around the world,” concluded Arellano. 

About the TransUnion Credit Perception Index

The TransUnion Credit Perception Index (CPI) study was conducted by TRUE Global Intelligence and commissioned by TransUnion. The study comprised of a survey targeting 1,100 consumers of the general population, as well as an oversample of 200 consumers of the unbanked population and an oversample of 200 small business owners between January and February 2023. To gauge Filipinos’ current attitudes and future receptivity towards credit, respondents were posed a series of questions to rate their knowledge, trust and favorability surrounding credit and other financial products. The study aims to provide a holistic view of credit perceptions across the landscape, and gain further insights to address gaps surrounding public perceptions of credit, what may influence them, and what may shift their perceptions. The study is intended to be a recurring effort to observe changes in prevailing credit perceptions in the Philippines over time. 

For more information and insights, please view the full report of the TransUnion Credit Perception Index study.