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New cardholders drive growth in credit cards

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THE PHILIPPINE credit card market continued to grow in the fourth quarter of 2023, mainly driven by new cardholders, a study by TransUnion showed.

Total outstanding credit card volumes in the Philippines increased to 11.2 million in the fourth quarter of 2023 from 9.3 million in the same period in 2022, TransUnion said in a statement on Wednesday.

Credit card penetration, or the percentage of adults holding at least one credit card, reached over 15% of Filipino adults in the same period.

“Together, these trends represent a growth of around 20% in both overall volume and penetration rate in the last year,” it said.

TransUnion said its study’s findings were consistent with data from the Credit Card Association of the Philippines (CCAP). CCAP data showed credit card spending increased by 39% to P853 billion in the first half of 2023, faster than the 29% increase in the comparable year-ago period.

“The trends in card originations, total volume, penetration, and spending all indicate a promising growth trajectory for the credit card market in the country,” TransUnion said.

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

The firm’s study showed that Gen Z Filipinos contributed significantly 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 10 (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,” it said. “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.”

Overall, new-to-card consumers accounted for 30% of all outstanding credit card balances during the first nine months of 2023, up from just 19% in 2019 or before the coronavirus pandemic.

Lenders can tap this market through value-added services such as reward points, installment payment facilities, and discounts associated with their card products, TransUnion said.

“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,” Mr. Sun said. 

“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,” he added.

By gender, male borrowers accounted for 60% of credit card originations while females comprised the remaining 40%.

The number of active credit card accounts was likewise dominated by men with a 61% share.

“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,” TransUnion said.

“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,” Mr. Sun said. “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.” — A.M.C. Sy

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