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Makati City,
10
July
2024
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12:02
Asia/Ulaanbaatar
- Total credit card originations per quarter approached the one million milestone in Q3 2023
- Gen Z Filipinos emerged as a significant consumer group driving credit originations and comprised one-third of all New-to-Card borrowers
- Women held 39% of all active credit card accounts despite market growth, a ratio lower than the overall population gender mix
- The New-to-Card segment of borrowers accounted for nearly a third (30%) of all outstanding credit card balances during the first nine months of 2023
Manila, Philippines, Jul 10, 2024 – Analysis by TransUnion, the global information and insights company (NYSE:TRU), shows that the credit card market in the Philippines continued to experience growth, with opportunities for further expansion through greater financial inclusion. According to insights shared at the recent 2024 TransUnion Financial Services Summit in Hong Kong, credit card origination volumes have consistently grown every quarter since Q3 2022 and closed in on the milestone of one million new cards per quarter in Q3 2023, despite a normal seasonal dip that was observed in the following fourth quarter.
Total outstanding credit card volumes increased year-over-year (YoY) from 9.3 million cards in Q4 2022 to 11.2 million cards in Q4 2023. Over the same period of time, the credit card penetration rate, meaning percentage of adults holding at least one credit card, reached over 15% of Filipino adults. Together, these trends represent a growth of around 20% in both overall volume and penetration rate in the last year.
Additional data from the Credit Card Association of the Philippines (CCAP) was consistent with the trends observed by TransUnion. Its data showed credit card spending increased by 39% to reach PHP 853 billion in the first half of 2023 – a jump from the 29% increase in the previous year1. The trends in card originations, total volume, penetration, and spending all indicate a promising growth trajectory for the credit card market in the country.
Younger generation emerging as a cornerstone for future market growth
A deeper dive into the TransUnion insights showed that Gen Z2 Filipinos are emerging as significant contributors to the increase in credit card originations. The percentage share of overall originations among Gen Z Filipinos has more than doubled over the past five years - up from just under one in ten (9%) in Q3 2019 to more than one in five (22%) in Q3 2023. This share will likely increase as more Gen Z consumers reach adulthood.
Chart 1: New-to-Card originations by generation
Source: TransUnion Philippines database
Gen Z Filipinos also comprised a greater share of the New-to-Card segment of borrowers – they made up one-third (33%) of all New-to-Card borrowers in 2023. New-to-Card borrowers are those originating their first ever credit card on file according to TransUnion Philippines’ data.
Data from TransUnion’s most recent Q1 2024 Philippines Consumer Pulse Study gave additional insight into factors positively affecting active credit participation among younger Filipinos. According to the study, almost all surveyed Gen Z Filipinos (98%) see access to credit and lending products as important to achieving their financial goals. They were also found to be some of the most frequent credit monitors in the country, consistently keeping an eye on their credit status to find the best credit offers accessible to them.
“The credit card market in the Philippines will continue to experience growth as demand remains high, especially amongst younger consumers. Data from TransUnion clearly shows that the younger generation of Filipinos, particularly Gen Z, are quickly emerging as a cornerstone for future market growth. This generation places a higher importance on accessing credit and lending products to achieve their financial goals. As more Gen Z consumers reach adulthood, we expect their share of the credit market to continue increasing,” said Weihan Sun, Principal of Research and Consulting for Asia Pacific at TransUnion.
Gender parity remains elusive
Despite the promising trend of younger generations participating in the credit market, TransUnion’s analysis showed that more effort is needed to foster greater financial inclusion for women. A breakdown of credit card originations data by gender revealed a gap between male and female borrowers.
Recent quarterly findings showed that male borrowers accounted for 60% of credit card originations, while females only comprised 40%. This ratio has remained relatively consistent over the past five years, highlighting a strong need to focus more on extending financial inclusion among female consumers. The number of active credit card accounts is also skewed heavily in favor of men who hold the majority share of a 61%-39% split.
“As TransUnion continues its pursuit of financial inclusion in the Philippines, closing the gender gap among credit card borrowers also emerges as a promising avenue for growth,” said Sun. “Lenders should consider offerings specifically tailored to female consumers to foster a more financially inclusive credit market, which at the same time would help them to further capitalize on the growth potential of an expanding market.”
New-to-Card borrowers represent further opportunity for growth
As credit card adoption in the Philippines continues to boom, New-to-Card consumers particularly represent a significant growth opportunity. These consumers accounted for nearly a third (30%) of all outstanding credit card balances during the first nine months of 2023, which is a significant jump from pre-pandemic levels when they made up just 19% in the full year of 2019. This trend signals significant opportunity for lenders to tap into the growing market of New-to-Card consumers in the country, which could, in part also be ascribed to value-added services such as reward points, instalment payment facilities, and discounts associated with these cards.
“While it’s an important factor for potential growth opportunities among lenders, bringing New-to-Card consumers into the formal financial system can also drive greater financial inclusion by catering to a larger demographic of borrowers. To that end, TransUnion Philippines remains committed to finding innovative ways to use alternative data to help more consumers access the credit they need,” said Sun. “We are focused on helping Filipinos who were previously deemed invisible by the formal financial system to access the credit they need to broaden their horizons, build wealth and attain greater flexibility, contributing to the development of the country as a whole.”
1 https://www.pna.gov.ph/articles/1212652
2 Generations are defined as follows: Gen Z, born 1995–2010; Millennials, born 1980–1994; Gen X, born 1965–1979; and Baby Boomers, born 1944–1964
