Credit score might seem like a foreign concept to many, but that shouldn’t stop you from learning about a pretty important part of your financial future.
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Written by Yogesh Daware, Chief Commercial Officer at TransUnion Philippines, edited by Rafael Bautista
Gen Z Filipinos are coming of age, with the eldest among them already carving paths in the workforce. As their spending power rises in the coming years, they are poised to become a major force in the credit market. By understanding their needs and preferences, the formal financial sector can foster greater financial inclusion for this emerging generation of consumers.
GEN Z AND CREDIT
Data from the second annual TransUnion Credit Perception Index (CPI) study in 2024 showed that Gen Z Filipinos are more eager to use credit. Their 2024 CPI score surged to 83 – a remarkable 19-point increase from 2023. Compared to Millennials, Gen X, and Boomers, Gen Z was the only generation whose CPI scores increased.
Digging deeper, the CPI study showed that Gen Z Filipinos see credit as one of the tools they can use to improve their financial situation. Nearly half (45%) considered themselves lower middle class, while 72% often found themselves running low on funds by month end.
This desire for enhanced financial flexibility may explain why credit card usage is on the rise among Gen Z. Compared to other generations, 45% of Gen Z Filipinos own a credit card, outpacing Millennials (38%), Gen X (39%) and Boomers (32%). They are also the most likely to use credit to make purchases in future, with 42% planning to do so in the next three months and 45% the next year, according to the 2024 CPI study.
This openness and increased appetite for credit means the industry as a whole needs to increase efforts to empower these young consumers to confidently navigate the world of finance by expanding credit education to more young Filipinos.
THE POWER OF ALTERNATIVE DATA
While Gen Z’s enthusiasm for credit is clear, a lack of credit history among many young Filipinos — particularly those classified as New-to-Credit (NTC) — could prevent them from accessing more credit products and services. According to the 2024 CPI study, almost half of Gen Z Filipinos (49%) believed that the length of credit history is a factor affecting their credit worthiness.
However, including alternative data in credit scoring has the potential to be a game changer for financial inclusion. By leveraging insights from both traditional data and alternative data — like mobile telco data — financial institutions can paint a more complete picture of a person’s financial history to help facilitate insight-driven credit decisions. This approach bridges gaps, especially for younger consumers who are new to the credit market.
To that end, TransUnion has partnered with leading telco companies in the Philippines to help financial institutions integrate alternative data into their credit decision-making processes. The collaboration enables lenders to say “yes” to more consumers — ones they may have turned down previously due to insufficient credit information in compliance with their risk management strategies.
YES TO FINANCIAL EDUCATION
Creating greater opportunities for young people to access credit should go hand in hand with further promoting financial education among younger generations, who usually are less experienced in financial management. As a leading information and insights company, TransUnion regularly shares findings derived from our global studies in the Philippines, such as the Consumer Pulse Study which examines local attitudes on household spending, income and debt, and our Digital Fraud Report which is based on intelligence from our global identity and fraud solutions. These insights allow consumers to understand the latest trends in market and encourage them to take relevant actions for better financial management and identity protection.
To effectively communicate these insights, multiple online touch points on Facebook and LinkedIn are used to educate Filipinos about credit and contribute to greater financial literacy. It is increasingly important to use online channels and platforms to connect with digitally native Gen Z consumers. Data from the 2024 CPI study supports this as 66% of Gen Z Filipinos said they would like to learn about financial products and services through social media.
As more Gen Z Filipinos take their first steps towards their lifelong credit journeys, now is the time to build lasting relationships with this new wave of credit seekers. Together, we must collaborate to drive the changes needed for better financial inclusion, promote financial education, strengthen overall financial resilience, and support the nation’s economic growth.
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