Point-of-sale loans (POS) in the Philippines are set to reach a value of ₱1.67trillion by 2028, according to research from instalment solutions provider, UnaCash. This is validated by its recent survey which indicated that 91 per cent of consumers in the local market are inclined to using this financing option.
According to the company’s research, 91 per cent of consumers in the local market are inclined to use POS loans as a financing option. This comes off the back of household spending consisting of roughly 72.8 per cent of the country’s economic activity, according to data from the Bangko Sentral ng Pilipinas (BSP) and the Philippines Statistics Authority (PSA).
Furthermore, consumer loans have a 16.4 per cent increase from ₱1.968trillion in March 2022 and ₱2.291trillion in the same month in 2023. The most common purpose of securing extra credit was to purchase basic goods and services (52 per cent). This was followed by business start-up or expansion (24 per cent), and education (12 per cent).
Additionally, three per cent of personal consumption loans by households were taken out to purchase consumer goods. Overall, 55 per cent 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
UnaCash survey of 137 respondents from its online community on the attitude of Filipino consumers to POS financing reveals the financing option has gained significant traction in the local market. In fact, 70 per cent of online shoppers stated the utilisation of at least one POS financing solution.
Notably, 33 per cent of offline shoppers and 22 per cent 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 per cent)
- personalised customer experience (40 per cent)
- avoid shipping delays (34 per cent)
In contrast, online consumers prioritised:
- the convenience and accessibility (50 per cent) that e-commerce platforms provide
- array of choices for purchases (40 per cent)
- payment flexibility which includes POS-financing options (37 per cent)
- the convenience of the door-to-door delivery of services (37 per cent)
Exploring digital payments
The survey also reveals a trend for POS financing options. Short loans disbursed to e-wallets are used by 39 per cent of offline shoppers and 31 per cent of online shoppers. Credit card instalments are more popular among offline shoppers than online shoppers (16 per cent in contrast to 10 per cent). Eleven per cent of offline shoppers used in-store POS finance offers, while 30 per cent of online shoppers used buy now, pay later (BNPL) options.
Filipino consumers recognise 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 per cent) 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.
Thirty-four per cent of consumers tried this service out of curiosity. Meanwhile, 24 per cent cited that this option supports addressing the gap in terms of income insufficiency.
Sixty-five per cent 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. However, 24 per cent 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 per cent from 2023 to 2028. It is also forecasted that the central bank will leave basic rates on hold through 2024 as global monetary conditions stabilise and as headwinds to the Philippine economy mount.
Given favourable macroeconomic conditions, rising consumer purchasing power, increasing levels of digitalisation 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.
