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BUYING POWER SHRINKS | Income of 6 in 10 households ‘negatively impacted’ by pandemic

 

 

 

 

TWO-THIRDS of consumers or 66% reported that their household income was severely affected by the COVID-19 pandemic in the second quarter of the year. The number is broadly the same as the first quarter of 2021 (up one percentage points).

The impact was more prominent for middle-aged respondents – 69% of Gen Xers (born 1965–1979) and 68% of Millennials (born 1980–1994), according to new research from insights company TransUnion.

TransUnion’s ConsumerPulse study findings showed the outlook is still uncertain, with 54% of respondents expecting their household income to be negatively impacted in the future – an increase of five percentage points from the previous quarter. The majority of consumers (85%) continued to be concerned about being able to pay their bills and loans, with nearly half (49%) anticipating they’ll be unable to pay at least one of their current bills and loans in full.

Among those who expect they’ll be unable to pay bills/loans, middle generations plan to use money from savings (47% of Millennials and 42% of Gen Xers), refinance/renegotiate payments/rates (10% of Millennials and 12% of Gen Xers), and take out a personal loan (both at 14%) – more than other generations would. Among Gen Z (born 1995–2003), for instance, 40% plan to use money from savings, 8% plan to refinance/renegotiate payments/rates, and 12% said they will take out a personal loan.

Middle generations also reported having saved more in emergency funds (50% of Millennials and 48% of Gen Xers, versus 40% of Gen Z) and paid down debt faster (24% of Millennials and 19% of Gen Xers, versus 15% of Gen Z). However, they still have greater credit needs – 52% of Gen Xers and 50% of Millennials said they plan to apply for new credit or refinance existing credit within the next year, compared to only 44% of Gen Z. Specifically, Philippine consumers plan to apply for new personal loans (23%), credit cards (16%), and mortgages (16%).

“The second quarter started with stricter quarantine restrictions anew as the Philippines faced a surge in COVID-19 infections. The economic consequences of the pandemic remain prevalent across many aspects of our study data, and in some cases, we are seeing worsening results – from consumers’ inability to pay bills and loans to being targeted and falling victim to fraud schemes,” said Pia Arellano, TransUnion Philippines president and CEO. 

“Despite this, many respondents are still hopeful that their finances will recover which is a good sign of their economic outlook. Our results show the provision and availability of credit is a big feature for Filipino finances and consumers’ ability to balance household finances in the coming months. Lenders need to make informed decisions so they can extend consumers the products best suited to their individual needs and circumstances, and help build a sustainable recovery whilst also managing risk effectively.”

 Consumers optimistic 

Among all the respondents, 74% expressed positive feelings about their financial outlook, with 61% classifying their financial situation as hopeful – where their household income has decreased, but they think their finances will recover. On the other hand, 8% said their financial situation was either stable or thriving – where their household income has not decreased and their finances in 2021 are stable or better. Meanwhile, 5% said they were resilient as their household income has decreased during the pandemic (currently or in the past) but their finances have fully recovered.

Philippine consumers indicated they plan to increase or at least retain their household spending over the next three months. Seventy-two percent said they will increase or at least retain their spending on digital services and 61% on retail (clothing, electronics, etc.). However, everyday living priorities are still in order as 77% said they will also increase or at least retain spending on medical care/services, 74% on bills and loans, and 62% on retirement funds/investing.

To further understand the financial impact of COVID-19, the Consumer Pulse study also includes a section on financial inclusion. It found that 86% of respondents (a drop of four percentage points from the previous quarter) believe access to credit is at least moderately important to achieve their financial goals. However, only 32% (a drop of two percentage points) said they have sufficient access to credit. The older the respondents are, the more they felt they have enough access to credit and lending programs: 42% of Baby Boomers (born 1944–1964) share that belief, whereas only 31% of Gen Z say they do. Despite this, 77% of all respondents believe that monitoring credit is very or extremely important. More than two-thirds (68%) also monitor their credit at least monthly.

Significant increase in digital fraud activity

Of Philippine respondents, 57% expect their number of online transactions to increase over the next three months. However, alongside increased online activity levels, fraudsters keep taking advantage. During the pandemic, there was an increase in fraud activity, with digital fraud attempts from the Philippines increasing 19% when comparing the first four months of 2021 with the last four months of 2020, as reported in TransUnion’s most recent global fraud study.

In the Consumer Pulse study, meanwhile, 42% (an increase of three percentage points) said they have been targeted by a fraud scheme but did not become a victim of it. Unfortunately, 6% (an increase of two percentage points) acted on a fraud scheme and became a victim.

Phishing (40% of those targeted) and third-party seller scams on legitimate retail websites (29%) remain the most common COVID-19-related digital fraud schemes encountered by consumers in the Philippines, with shipping fraud (24%) coming in close at third.

“We’ve seen in both the digital fraud attempts monitored by TransUnion’s fraud analytics solutions and the responses of consumers on ground that fraud remains a persistent global problem. As we continuously work to regain our economic progress, it is crucial that businesses, consumers, and the government approach recovery holistically. This entails creating programs and actions in response to insights similar to those we’ve shared, while at the same time maximizing the available digital solutions that can help fast-track results and accelerate growth in areas that it is needed most,” Arellano said. PR

*TransUnion’s global Consumer Pulse study highlights the ongoing financial impact of COVID-19. The most recent survey includes responses from 1,100 consumers in the Philippines and was conducted online between June 1 and June 16, 2021. 

  

 

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