MANILA, PHILIPPINES – UnaCash, an in-app and in-store installment solutions provider, expects the growth of point-of-sale loans (POS) in the Philippines to reach a value of ₱1.67 trillion by 2028. This is validated by its recent survey which indicated that 91% of consumers in the local market are inclined to using this financing option.
As consumer behavior continues to evolve, the local market witnessed a substantial transformation in the spending habits of Filipino consumers. Household spending consists of approximately 72.8% of the country’s economic activity, according to data from the Bangko Sentral ng Pilipinas (BSP) and the Philippines Statistics Authority (PSA).
Consequently, consumer loans have a 16.4% increase from ₱1.968 trillion in March 2022 and ₱2.291 trillion in the same month in 2023, the most common purpose of securing extra credit was to purchase basic goods and services (52%), followed by business start-up or expansion (24%), and education (12%). Additional 3% of personal consumption loans by households were taken out to purchase consumer goods. Overall, 55% of personal consumption is taken by local households through POS purchases to address the financial gap that is needed to maintain their way of living.
The Unwavering Rise of POS Financing
To gain better insights into the consumer behavior in the Philippines, UnaCash surveyed 137 respondents from its online community on the attitude of Filipino consumers to POS Financing. The financing option has gained significant traction in the local market, 70% of online shoppers stated the utilization of at least one POS financing solution.
Notably, 33% of offline shoppers and 22% of online shoppers cited the availability of POS financing as a crucial factor influencing their choice to shop either in physical or online stores. Several factors emerged as key drivers for choosing between online and offline shopping. For in-store shoppers, the following reasons were highlighted; desire to physically inspect the products (41%), personalized customer experience (40%), and avoid shipping delays (34%). In contrast, online consumers prioritized the convenience and accessibility (50%) that e-commerce platforms provide. This is followed by the wide array of choices for purchases (40%), payment flexibility which includes POS-financing options, (37%), and the convenience of the door-to-door delivery of services (37%).
The survey also reveals a trend for POS financing options. Short loans disbursed to e-wallets are used by 39% of offline shoppers and 31% of online shoppers. Credit card installments are more popular among offline shoppers than online shoppers (16% in contrast to 10%). 11% of offline shoppers used in-store POS finance offers, while 30% of online shoppers used buy now, pay later (BNPL) options.
Filipino consumers recognize the value of POS financing, as aligned with the broader market data provided by BSP. The survey disclosed that the majority of its respondents (42%) preferred the POS financing option the most due to the option of spreading the cost of purchase over time, even when their income is sufficient to cover the full price of the item. 34% of consumers tried this service out of curiosity, while 24% cited that this option supports addressing the gap in terms of income insufficiency.
65% of respondents are likely to use POS options for future purchases to enjoy spreading costs of their purchases over a period of time to free up more cash for other expenses, while 26% are likely to use POS financing options for future purchases as they are constrained on income and are unable to afford the items otherwise. Thus, strong consumer demand is likely to be the driver of market growth in the near future.
A Bright Outlook for the POS Financing Market
Despite inflationary forces being forecasted to remain elevated across 2023, nominal income growth is projected to outpace inflation, which ensures real income growth for consumers and gives greater propensity for more spending. According to a forecast by Fitch, consumer spending in the Philippines is predicted to grow at an average of 5.9% from 2023 to 2028. It is also forecasted that the central bank will leave basic rates on hold through 2024 as global monetary conditions stabilize and as headwinds to the Philippine economy mount.
Given these favorable macroeconomic conditions, rising consumer purchasing power, increasing levels of digitalization and financial inclusion, UnaCash predicts that the POS financing market in the Philippines will continue growing at the same rate that has been seen in the post-pandemic period.