Gen Zs driving boom: PH digital lending market to exceed $1B this year
The popularity of online lending, which is deemed convenient and more accessible compared to traditional loans, is only expected to further boom this year.
A study by online lending platform Digido estimates that the digital lending market in the Philippines will exceed $1 billion by the second half of this year. Broken down, more than half or about $556.5 million of the projected borrowings will come from nonbank digital lenders.
Digido says the 2025 forecast exceeds the 2024 year-end estimate of $796 million and $693 million booked in 2023.
“Our latest findings affirm the majority of Filipinos’ growing pivot toward digital sources of credit as part of their personal finance management,” Digido business development manager Rose Arreco says.
“We are optimistic that these lending segments will be able to maintain their high growth rates in view of its accessibility for the financially underserved, progressive government support and various projects promoting further digitalization,” she adds.
The local online lending space has been growing annually by 28 percent from 2013 to 2023, Digido notes.
This, as more Filipinos download mobile lending applications to secure credit. Digido forecasts that the total number of downloads reached 73.5 million in 2024, showing 56.4-percent growth from 2023.
“This growth trend is also largely determined by the fact that a third of the country’s population is from Generation Z—a segment certainly ready to fully accept innovative solutions in the field of financial technologies for mobile applications,” Arreco explains.
Buy now, pay later
In a related study by credit insights firm TransUnion, it reveals that Gen Z borrowers have become accustomed to tapping buy now, pay later (BNPL) schemes as a form of payment when paying for their purchases.
BNPL allows them to immediately settle their transactions through a loan, which will be paid back in fixed installments.
TransUnion First Quarter 2024 Consumer Pulse Survey notes that 81 percent of the surveyed Gen Z respondents are aware of this lending option. Majority, or 65 percent, had made at least one BNPL transaction in the past 12 months when the study was conducted.
Gen Zs prefer BNPLs because “it was easy to apply,” the report says. The young respondents also use this because it allows them to spread the payments over time, making it affordable.
Alternative credit scoring
FinTech Alliance PH says that financial technology (fintech) players have been ramping up their loan products to extend formal borrowings, especially to micro, small and medium enterprises which, at times, are forced to resort to predatory lenders.
The fintech operators approve loans quickly and eliminate the need to submit several documents during the loan application process, which include credit history.
The requirements deter others from securing traditional bank loans because not everyone has financial reports to prove their capacity to pay back the loan.
The fintech players, as such, are using alternative ways to determine creditworthiness.
By looking into one’s payment behavior through the borrowers’ monthly bill payments, for example, Fintech Alliance PH founding chair Lito Villanueva explains that fintech operators can establish a credit profile. This means they can have a basis for underwriting a loan that will suit the needs of the borrowers.
