Consumer spending to drive point-of-sale loans to P1.67 trillion

CEBU, Philippines — High consumer spending in the Philippines is seen to drive the value of point-of-sale loans to reach P1.67 trillion by 2028, according to a survey conducted by UnaCash.

UnaCash, an in-app and in-store installment solutions provider, revealed that 91 percent of consumers in the local market are inclined to use the POS loan financing option.

POS financing is when the merchant offers their customers a consumer financing solution at the point of purchase, in order to assist them in buying the product or service.

As consumer behavior continues to evolve, the local market witnessed a substantial transformation in the spending habits of Filipino consumers.

Bangko Sentral Ng Pilipinas (BSP) and the Philippines Statistics Authority (PSA) record showed that household spending consists of approximately 72.8 percent of the country’s economic activity.

Consequently, consumer loans have a 16.4 percent increase from P1.968 trillion in March 2022 and P2.291 trillion in the same month in 2023. The most common purpose of securing extra credit was to purchase basic goods and services (52 percent), followed by business start-up or expansion (24 percent), and education (12 percent ). An additional three percent of personal consumption loans by households were taken out to purchase consumer goods.

Overall, 55 percent 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 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 percent of online shoppers stated the utilization of at least one POS financing solution.

Significantly, the presence of POS financing played a vital role in the decision-making process for 33 percent of in-store shoppers and 22 percent of those who preferred shopping online.

The survey uncovered that 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 percent), personalized customer experience (40 percent), and avoiding shipping delays (34 percent).

In contrast, online consumers prioritized the convenience and accessibility (50 percent) that e-commerce platforms provide. This is followed by the wide array of choices for purchases (40 percent), payment flexibility which includes POS-financing options, (37 percent), and the convenience of the door-to-door delivery of services (37 percent).

Short loans disbursed to e-wallets are used by 39 percent of offline shoppers and 31 percent of online shoppers.

Credit card installments are more popular among offline shoppers than online shoppers (16 percent in contrast to 10 percent). About 11 percent of offline shoppers used in-store POS finance offers, while 30% of online shoppers used the buy now, pay later (BNPL) options.

According to the survey, 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 percent) preferred the POS financing option the most due to the option of spreading the cost of the purchase over time, even when their income is sufficient to cover the full price of the item. While 34 percent of consumers tried this service out of curiosity, 24 percent cited that this option supports addressing the gap in terms of income insufficiency.

Sixty-five percent of respondents are likely to use POS options for future purchases to enjoy spreading the costs of their purchases over a period of time to free up more cash for other expenses, while 26 percent 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.

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 a greater propensity for more spending.

According to a forecast released by Fitch, consumer spending in the Philippines is predicted to grow at an average of 5.9 percent 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.

Considering the favorable macroeconomic backdrop, the upswing in consumer spending capacity, the growing prevalence of digitalization, and the deepening financial inclusivity, UnaCash anticipates that the POS financing market in the Philippines will sustain its post-pandemic trajectory.