Enable a financially inclusive future

With more Filipinos integrated into the formal financial system, goods and services need to be properly designed to enable greater participation

Financial inclusion allows everyone to access a wide range of financial services. Access is defined by the availability and how well products and services meet diverse needs.

Whether it’s starting a business, buying a home, or planning for retirement, financial inclusion helps achieve broader aspirations in life. By helping individuals and businesses take control of their finances, financial inclusion can drive the sustainable development of more Filipinos nationwide.

Addressing local challenges towards financial inclusion

Despite steps taken towards greater financial inclusion, exclusion continues to disproportionately affect many Filipinos. In a survey conducted by the Bangko Sentral ng Pilipinas (BSP) in 2019, over 51 million Filipinos were unbanked. As formal lenders tend to reject consumers due to lack of information, 44% of the unbanked population has to rely on non-bank sources for loans.

In response, the rise of digital banking is creating more opportunities for financial inclusion. At a press conference, the BSP cited an increase in basic deposit accounts as well as the activation of e-wallet services, which enabled around 20 million Filipinos to be integrated into the formal financial system between 2020 and the third quarter of 2021, bringing the number of “banked” Filipino adults. to about 41 million.

With the increase in digital transactions, connectivity is key to realizing the potential of digital financial services. Poor internet access and infrastructure will only hinder progress. Lack of awareness is also among the reasons why Filipinos forego financial services. While the BSP survey showed that 7 out of 10 unbanked adults own a mobile phone, lack of knowledge about mobile financial services and a preference for banking transactions were barriers to online financial transactions.

To deepen trust in digital financial institutions, the government must continue to work with the private sector on financial education programs and building digital skills to boost access. Financial institutions and other businesses should help raise general awareness.

Good credit score for better financial flexibility

For better access to financial goods and services, a good credit rating is essential. Based on increased information about a person’s credit history, credit scores help lenders assess a person’s financial risk allowing customers to benefit from better terms on credit cards, home loans and insurance.

Leveraging technology and innovation and backed by stalwarts in the local banking industry, TransUnion Philippines was established in 2011 to enable trust between consumers and businesses. As the country’s first international private credit bureau, TransUnion uses alternative data where traditional data from financial institutions is unavailable to give financially “invisible” Filipinos a traditional credit score. Covering cellphone and device data, alternative data provides additional information about a candidate’s creditworthiness.

Along with credit information campaigns, TransUnion uses information to unlock credit opportunities for Filipinos. For businesses, the updated CreditVision Link Universal Score and personalized scorecards leverage credit data and alternative credit data to improve risk decisions and understand the consumer journey, while digital onboarding simplifies processes to increase acquisitions while protecting against fraud.

Other risk management solutions include credit reports that integrate data from Philippine financial institutions for a comprehensive view of consumers’ credit history, an income estimator for precise consumer targeting, and triggers that monitor changes in client behavior to identify opportunities and limit risk – enabling companies to manage their portfolios more effectively. With these measures, more Filipino consumers are becoming credit visible as lenders and businesses have comprehensive financial behavior assessments.

As the Philippines moves into a post-pandemic period, the financial market needs to be more inclusive. By empowering individuals to become financially visible by providing institutions with information and insights to comprehensively assess risk, people can act as a catalyst for the economy, benefiting the country while unlocking a higher quality of life for themselves and their families.

Pia Arellano has over 25 years of experience in banking, payment solutions, telecommunications and money transfer services. She was instrumental in establishing TransUnion as a risk management, data and information solutions partner for banks and financial institutions in the Philippines.

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