MANILA -The Philippine digital lending market is expected to grow by 45.4 percent to reach $488.8 million in 2023 from $336 million in 2022 and is poised for a “rampant surge” over the next four years, according to PayNEXT360.
The research and consulting firm—which holds offices in the United Kingdom, the United States and India—said in a report that the adoption of alternative lending channels in the Philippines is growing by an average of 36.2 percent yearly during the forecast period of 2023-2027.
This means that the market is expected to ring up $1.68 billion by 2027, thanks mainly to digital banking service providers such as neo-banks and financial technology or fintech firms.
PayNEXT360 describes alternative lending as ranging from personalized business-to-consumer offerings like payroll advances to strategic business-to-business solutions like lines of credit.
Payment instruments for these transactions are listed as including cash, checks, credit transfer, direct debits, debit card, credit card and e-money.
“The high percentage of the unbanked population, coupled with the growing demand for credit amid the current macroeconomic environment, has resulted in more and more consumers turning to alternative lending providers in 2022,” PayNEXT350 said in a statement.
Inflation impact
“This trend is projected to further continue in 2023, as inflation continues to impact the disposable income of many across the Southeast Asian market,” it added.
Citing an example, PayNEXT360 noted that fintech startup Salmon launched its first lending product in the Philippines in January 2023.
For the launch of its point-of-sale lending service, Salmon partnered with 30 merchants and aimed at millennials and Gen Z consumers “who do not have the time and patience to go through the complicated processes of conventional institutions.”
Tonik group also launched new lending products that offer flexible terms, such as no collateral required for consumer purchases, or the object of purchase—such as a property—to be the collateral itself.
Another driver of growth is the trend of digital lenders teaming up with artificial intelligence-powered fintech firms in order to enable accurate credit risk profile assessment, including for the unbanked borrowers — such as UNO Digital partnering with Trusting Social.
Also, players are teaming up with one another to diversify their service offerings and add another revenue stream to their core operations — such as Tala teaming up with Union Digital, which launched an e-wallet lending service .