A new research from information and insights company TransUnion found that in the second quarter of the year, two-thirds (66 percent) of Philippine consumers reported their household income was negatively impacted by the effects of the Covid-19 pandemic, broadly the same (up one percentage point) from the first quarter.
The impact was more prominent for middle-aged respondents – 69 percent of Gen Xers (born 1965–1979) and 68 percent of millennials (born 1980–1994).
TransUnion’s ConsumerPulse study findings showed the outlook is still uncertain, with 54 percent of respondents expecting their household income to be impacted in the future—an increase of five percentage points from the previous quarter. The majority of consumers (85 percent) continued to be concerned about being able to pay their bills and loans, with nearly half (49 percent) anticipating they’ll be unable to pay at least one of their current bills and loans in full.
Among those who expect they’ll be unable to pay bills/loans, middle generations plan to use money from savings (47 percent of millennials and 42 percent of Gen Xers), refinance/renegotiate payments/rates (10 percent of millennials and 12 percent of Gen Xers), and take out a personal loan (both at 14 percent) – more than other generations would. Among Gen Z (born 1995–2003), for instance, 40 percent plan to use money from savings, 8 percent plan to refinance/renegotiate payments/rates, and 12 percent said they would take out a personal loan.
Middle generations also reported having saved more in emergency funds (50 percent of millennials and 48 percent of Gen Xers, versus 40 percent of Gen Z) and paid down debt faster (24 percent of millennials and 19 percent of Gen Xers, versus 15 percent of Gen Z).
However, they still have greater credit needs – 52 percent of Gen Xers and 50 percent of millennials said they plan to apply for new credit or refinance existing credit within the next year, compared to only 44 percent of Gen Z. Specifically, Philippine consumers plan to apply for new personal loans (23 percent), credit cards (16 percent) and mortgages (16 percent).
“The second quarter started with stricter quarantine restrictions anew as the Philippines faced a surge in Covid-19 infections. The economic consequences of the pandemic remain prevalent across many aspects of our study data, and in some cases, we are seeing worsening results – from consumers’ inability to pay bills and loans to being targeted and falling victim to fraud schemes,” said Pia Arellano, TransUnion Philippines president and CEO.
“Despite this, many respondents are still hopeful that their finances will recover which is a good sign of their economic outlook. Our results show the provision and availability of credit is a big feature for Filipino finances and consumers’ ability to balance household finances in the coming months. Lenders need to make informed decisions so they can extend consumers the products best suited to their individual needs and circumstances, and help build a sustainable recovery whilst also managing risk effectively,” Arellano said.
Among respondents, 74 percent expressed positive feelings about their financial outlook, with 61 percent classifying their financial situation as hopeful – where their household income has decreased, but they think their finances will recover. On the other hand, 8 percent said their financial situation was either stable or thriving – where their household income has not decreased and their finances in 2021 are as planned or better. Meanwhile, 5 percent said they were resilient as their household income has decreased during the pandemic (currently or in the past) but their finances have fully recovered.
Filipino consumers indicated they plan to increase or at least retain their household spending over the next three months. Seventy-two percent said they will increase or at least retain their spending on digital services and 61 percent on retail (clothing, electronics, etc.). However, everyday living priorities are still in order as 77 percent said they will also increase or at least retain spending on medical care/services, 74 percent on bills and loans and 62 percent on retirement funds/investing.
To further understand the financial impact of COVID-19, the consumer pulse study also includes a section on financial inclusion. It found that 86 percent of respondents (a drop of four percentage points from previous quarter) believe access to credit is at least moderately important to achieve their financial goals.
However, only 32 percent (a drop of two percentage points) said they have sufficient access to credit. The older the respondents are, the more they felt they have enough access to credit and lending programs: 42 percent of Baby Boomers (born 1944–1964) share that belief, whereas only 31 percent of Gen Z say they do. Despite this, 77 percent of all respondents believe that monitoring credit is very or extremely important. More than two-thirds (68 percent) also monitor their credit at least monthly.
Of the Philippines’ respondents, 57 percent expect their number of online transactions to increase over the next three months. However, alongside increased online activity levels, fraudsters keep taking advantage. During the pandemic, there was an increase in fraud activity, with digital fraud attempts from the Philippines increasing 19 percent when comparing the first four months of 2021 with the last four months of 2020, as reported in TransUnion’s most recent global fraud study.
In the Consumer Pulse study, meanwhile, 42 percent (an increase of three percentage points) said they have been targeted by a fraud scheme but did not become a victim of it. Unfortunately, 6 percent (an increase of two percentage points) acted on a fraud scheme and became a victim.
Phishing (40 percent of those targeted) and third-party seller scams on legitimate retail websites (29 percent) remain the most common Covid-19-related digital fraud schemes encountered by consumers in the Philippines, with shipping fraud (24 percent) coming in close at third.
“We’ve seen in the both the digital fraud attempts monitored by TransUnion’s fraud analytics solutions and the responses of consumers on ground that fraud remains a persistent global problem. As we continuously work to regain our economic progress, it is crucial that businesses, consumers, and the government approach recovery holistically. This entails creating programs and actions in response to insights similar to those we’ve shared, while at the same time maximizing the available digital solutions that can help fast-track results and accelerate growth in areas that it is needed most,” Arellano said.