Filipinos are now turning to credit cards for quick cash loans than to pawning.
Simon Calasanz, Chairman of the Credit Card Association of the Philippines (CCAP), said in an interview on the sidelines of CCAP’s 35th anniversary on Friday the group has noted a rising number of credit card holders in the country.
This opens up the opportunity for Filipinos to have quick access to cash via credit cards without having to pawn a piece of heirloom jewelry or watch.
Calasanz, Senior Vice President of HSBC, did not give statistics on this but said Filipinos see the advantage of credit cards versus pawnshops also for low-interest rates – about 3 percent – on the loan that they can amortize monthly, not to mention safety issues.
“Not a lot of people know they can actually get a cash loan from their bank. All it takes is one phone call (to their bank),” he added.
Alex Ilagan, Executive Director of CCAP, said the credit card penetration rate in the Philippines is still small at only 4 million against a 100 million population, which poses a huge opportunity for the industry.
Cash remains the credit card companies’ biggest competitor.
“There is room to grow,” Ilagan said, adding that 10 years ago, only 5 percent of purchases in malls are via credit card. This has zoomed to 35 percent, but is still small compared with 70 to 80 percent in developed economies.
CCAP said the growth of the credit card industry in the Philippines hinges on infrastructure and the unified identification card system, both of which would facilitate verification of identities of credit card applicants as well as provide more comprehensive information on the credit history of a person.
Unfortunately, the envisioned credit information bureau has yet to operationalize despite the passage of an enabling law and its rules and regulations.
Calasanz said another challenge involves the need to have a more efficient postal system to better serve credit card holders for the delivery of their bills and cards.
Credit card companies have also tapped alternative channels to reach out to their customers such as short messaging system, emails and contact centers.
Because of stricter regulations, CCAP also noted fewer incidences of skimming and fraud. One such regulation is the shift to the Europay Mastercard Visa (EMV) standard.
Calasanz said most credit card companies have adopted this standard ahead of the Bangko Sentral ng Pilipinas’ mandate for all cards to be EMV-compliant by 2017.
Compared with the traditional magnetic stripe technology, EMV, a global standard for interoperation of integrated circuit cards, has provided additional layers of security, including a unique digital seal or signature that is encrypted in every chip-enabled card.
Calasanz said there are 6.9 million credit cards now in circulation with each cardholder having an average of two cards. Yet Philippine households remain among the least leveraged in the world, purchasing mostly in cash.
Default rate has also been declining 25 basis points per year.
Calasanz said there is a link on savings and credit card ownership as this connotes consumer literacy – the ability to spend wisely. Bank population is currently at 30 million.
“Filipinos in general are prudent,” he said.
“There is a big opportunity to penetrate the younger, working population,” he noted, adding that the target is to double the number of cardholders.
Credit card companies are also adapting to the needs of the times for fast, reliable transactions. Contactless and mobile payments for small transactions like fast foods and transportation are among the innovations being introduced by credit cards.
Malaya, March 23, 2015