Banks urged to focus on financial inclusion

REGIONAL President and Chief Executive Officer of TransUnion Philippines Pia Arellano has repeatedly stressed that banks must now focus on the importance of "unserved," any individual who has never opened a traditional credit product and "underserved," those who have minimal credit participation, limited to a single type of credit product and have been active in the credit market for at least two years, consumers in the credit finance industry.

According to the provider's new global study entitled "Empowering Credit Inclusion: A Deeper Perspective on Credit Underserved and Unserved Consumers," there are significant volumes of unserved and underserved customers in countries with more developed credit as those with emerging credit economies.

"In the next 3 [to] 5 years, underserved consumers in the Philippines anticipate their need for credit will increase and the banks must realize this or they will fall behind. In the country alone, 39 percent of unserved consumers plan on applying for credit, compared to 51 percent of underserved consumers," said Arellano.

"The material percentage of both consumer groups who intend to seek credit indicates there is a real need for, and interest in it and finding ways to meet their needs while prudently managing risk represents a significant growth opportunity for lenders," she added.

According to the study, in the Philippines, more than half of both unserved (51 percent) and underserved (52 percent) consumers expected their need for credit to increase in the coming years but do not want to incur debt and lose control of their finances.

In addition to this, despite differences in age distribution, both unserved and underserved consumers in the Philippines would gladly expand their use of credit if they had lower weekly or monthly payments, and better consumer experience.

Arellano said high interest rates were the most common reason both unserved and underserved consumers rejected credit offers. Consumer experience also played a role in reasons why unserved and underserved consumers would reject it as well. Lengthy approval processes were cited as a factor in credit offer rejection for 17 percent of unserved and 8 percent of underserved consumers in the Philippines.

Meanwhile, 16 percent of unserved and 13 percent of underserved consumers said they rejected credit offers because they found alternative funding or received better offers.

"In the meantime, I will also present these to our lender partners so they can use these insights to better meet the unique needs of these consumer segments, and to educate them on ways they can build and improve their credit profiles," said Arellano.

Source: TheManila Times