Despite high interest rates, the credit card market in the Philippines continues to growth, according to insights shared at the recent 2024 TransUnion Financial Services Summit in Hong Kong.

Also, younger people are fueling the growth of the credit card market in the Philippines.
What was revealed during the summit was credit card origination volumes have consistently grown every quarter since the third quarter of 2022 and closed in on the milestone of one million new cards per quarter in the third quarter of 2023, despite a normal seasonal dip that was observed in the following fourth quarter.

“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,” said Weihan Sun, Principal of Research and Consulting for Asia Pacific at TransUnion.

“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,” the TransUnion official said.

Notably, interest rates in the Philippines remains high as the policy rate set by the Bangko Sentral ng Pilipinas remains at 6.5%, one of the highest in the region.

Also, the 9.5-percent reserve ratio requirement (RRR) of banks set by the BSP is among the highest in the region. Lowering the RRR can result in the release of billions of pesos of funds into the loan market.

STILL INCREASING

However, in the Philippines, total outstanding credit card volumes increased year-over-year (YoY) from 9.3 million cards in the fourth quarter or 2022 to 11.2 million cards in the fourth quarter of 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.

Meanwhile, additional data from the Credit Card Association of the Philippines (CCAP) was consistent with the trends observed by TransUnion, showing credit card spending increased by 39% to reach P853 billion in the first half of 2023 – a jump from the 29% increase in the previous year.

When it comes to driving the growth of the credit card market in the Philippines, the TransUnion insights showed that Generation Z are emerging as significant contributors, particularly their percentage share of overall originations has more than doubled over the past five years – up from just under one in ten (9%) in the third quarter of 2019 to more than one in five (22%) in the third quarter of 2023.

The Boomer generation still accounted for the lowest percentage of credit card holders in the Philippines.

Meanwhile, 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,” the TransUnion official said.

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