The Market Monitor Minding the Nation's Business
By Jerry Maglunog
Nearly 90 percent of goods bought with credit cards are consumer items, making the local economy household lending-driven.
This was how a leading credit-card entity described the attitude of Filipinos’ habit of using these cards. The country has roughly 7 million car holders, which is only about 5 percent of the population—a relatively low figure compared to those in other nations.
Simon Calasanz, president and CEO of Bankard, the credit-card arm of Rizal Commercial Banking Corp. (RCBC), said that, since a credit card is a consumer product, it is understandable that almost all its holders would use it to buy consumer goods.
“A credit card is a consumer product, so practically all balances would be considered ‘consumer,’” Calasanz said.
A rundown of items purchased via Bankard, now amounting to more than P10 billion, shows the most common items bought are laptops, smartphones, shoes, summer outfits, and gym equipment.
Purchases done through online-shopping sites Lazada and Zalora comprise more than 20 percent, representing a big change from conventional shopping, in which cardholders go to the malls to buy the items they want. Calasanz said the almost 180-degree turn in Filipinos’ attitude in credit-card use started nearly 15 years ago.
Before that, cards were used in emergency spending, such as paying for tuition and grocery items, and and advancing cash. “We have one of the least carded economies in the world,” Calasanz said.
Aside from this, Filipinos’ fear of debt makes the country one of the weakest in terms of household debt and even personal loans.
According to Calasanz, there are good and bad points in the limited entry of such financial technology in the country, but when the entire financial picture of the country is deliberated, the bad scenario outweighs the good. “[It’s] both good and bad.
Good, because you see [that] Filipinos [are] still pretty prudent, [and] bad because we aren’t able to take advantage of the facilities that are out there,” Calasanz said.
He reiterated his previous statement that the country still has a long way to reach its full potential when it comes to credit-card use.
The Philippines’s low credit-card penetration is in contrast with Japan, the United States and Canada, which all have over 70 percent of its people possessing credit cards.
Calasanz said using credit cards “can improve standards of living and spur economic activity.”
Some observers in the Philippine banking industry said the low penetration of credit cards offers a panoramic view of the big unbanked segment of the population, estimated to be 70 percent of the country’s 105 million.
Ninety-three percent of payment transactions in the Philippines is also made through cash, instead of through a debit card.
I for one would say that it is good that only 5% of the population have credit card access because most of the Filipinos does not know how to distinguish a want from a need just because they have a credit card they can just buy anything that crosses their mind since they can pay it on installment or if it is a straight payment they still have one month to save to pay and every time they use their credit that is their way of thinking until one day they have enormous debt.
I know someone who was in this situation. Lucky for her somebody bailed her out from that huge debt. I still believe that for you to spend or buy the latest phones or gadgets you must have money on hand meaning if you don’t have money you have no business buying expensive gadgets. Or better is save first, in doing this there is a possibility that you might get a better price for you gadget or you finally learn the difference between a need and a want.