AS CONSUMERS RELY ON PLASTIC TO PAY BILLS Credit card issuers expect strong growth

The Credit Card Association of the Philippines (CCAP) sees sustained growth in receivables and billings as more and more consumers rely on credit cards to extend their purchasing power.

Alex Ilagan, executive director of CCAP, told The STAR that credit card receivables jumped by 30 percent in the first quarter from the same period a year ago.

“This clearly indicates that the one percent upward adjustment in the credit card interest rate cap in January 2023 did not deter consumers from using their credit card as a way to extend their purchasing power to cope up with high inflation last year,” he said.

In January 2023, the Bangko Sentral ng Pilipinas (BSP) hiked the credit card cap by 100 basis points to three percent from two percent previously. This was meant to reflect the BSP’s policy tightening and to mitigate the impact of inflationary pressures on banks and credit card issuers.

Despite this, Ilagan said the credit card industry has been growing steadily at double-digit rates due to the higher number of cards issued and the amount of usage per card.

“A robust economy is a big factor that contributes to this growth since more people are qualified to own a credit card and they have more money to spend,” he said.

Another key driver to the industry’s growth is the healthy competition among issuers.

This, as issuers offer more incentives, more access to different types of credit cards and more opportunities on where and how borrowers can use their cards, he said.

Asked how consumer behavior and preferences changed since the COVID-19 pandemic, Ilagan said borrowers have used their credit cards frequently for travel, dining and shopping.

“One distinct behavioral change that developed during the pandemic was the growing preference for online purchases and the use of credit cards for online payment. We expect this trend to continue as consumers become more comfortable in using this option,” he said.

CCAP has also observed that more consumers are now converting their big purchases into installments as banks start to offer attractive rates.

“If prices of goods and services continue to be elevated in the future, we also expect that consumers will continue to opt for using their credit card for everyday purchases like gas and groceries to ease their cash flow,” Ilagan said.

Latest data from the BSP showed credit card loans surged by 29.3 percent to P762.19 billion in April from P589.52 billion in the same month in 2023.

This brought consumer loans to P1.35 trillion in April, 25.3 percent higher than the P1.08 trillion in the same month a year ago.

However, one of the challenges the industry faces is the ever-evolving methods employed in committing credit card fraud, Ilagan said.

“Fraudsters have the capability to adjust their modus to adapt and circumvent the new security features introduced by credit card issuers,” he said.

To address this, CCAP has been active in educating cardholders and the public on how fraud and other possible risks can be avoided.

“We believe that fraud prevention is a shared responsibility between the card issuer and the cardholder. Fraudsters will always look for and exploit the weakest link in the protective chain surrounding credit card usage,” he said.

“Awareness of the dangers is the first step in fraud prevention and this is one of CCAP’s principal advocacies,” he added.

Article Name:AS CONSUMERS RELY ON PLASTIC TO PAY BILLS Credit card issuers expect strong growth

Publication:The Philippine Star


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