Credit Card Penetration Expected to Increase in the Philippines
In the Philippines, the concept of “cash is king” remains dominant in the financial landscape, leading to relatively low credit card penetration. Despite the growing economy and population, a World Bank study revealed that only 8.1 percent of the country’s working population use credit cards, with 80 percent of retail transactions still paid with cash.
The belief that hard cash is more valuable than other forms of payment and that credit cards are a financial liability contributes to the low penetration rate. Cardholders are required to pay an annual fee to banks and financial institutions, deterring many from using credit cards.
However, with the resurgence of travel and increased spending, TransUnion Philippines is optimistic about the future of credit card usage. The company, a Chicago-based consumer credit reporting agency, forecasts an increase in credit card penetration to 9.42 percent for this year.
TransUnion, established in 2011, collects both traditional and alternative data to help banks process loans and other financial facilities for their customers. The company works with major banks and financial institutions, as well as telecommunications companies such as Globe and Smart.
Financial literacy remains a challenge in the Philippines, as the country ranks low in terms of financial literacy among 144 economies. Angela Chan, TransUnion’s senior director for marketing communications for Asia-Pacific, suggests that financial education is essential for maximizing the growth potential of credit cards as an alternative mode of payment.
As the financial landscape continues to evolve with the rise of virtual currencies like Bitcoin and e-money, credit card usage is also expected to increase. While cash remains important, credit cards offer financial flexibility for up to 45 days.
The future of credit card penetration in the Philippines looks promising, with the potential for increased usage as financial literacy and awareness improve.