Why rural customers want instant credit – and how to deliver it to them.

Digital finance is exploding in the Philippines. Customers are demanding instant, accessible, flexible loan products, and many of these people are from underserved, rural communities.

Digital finance is exploding in the Philippines. Customers are demanding instant, accessible, flexible loan products, and many of these people are from underserved, rural communities.

It’s the latest chapter in a familiar global story. E-commerce, mobile banking, buy-now-pay-later, and other alternative, digital financial products are experiencing a boom due to rapidly changing patterns of consumer and business behaviour.

The turning point was the COVID-19 pandemic, which accelerated the adoption of digital products across all walks of life.

Rural borrowers have been enthusiastic adopters, with around 75% of consumers interested in online loans.

They demand easy access to credit to settle debts, to start businesses, but primarily, according to BSP research – to pay for basic daily necessities.

The pace of adoption.

The challenges have only become more acute over the last few years, but the solutions are coming in thick and fast.

The COVID-19 pandemic prevented many individuals from accessing finance, particularly in rural areas, as bank branches were shuttered due to restrictions on movement.

However, many of the people affected by these restrictions did not have access to physical financial services even before the pandemic. Indeed, a 2021 report found that 80% of Filipino adults – 52 million people – were unable to apply for bank loans due to an inability to access financial services, which in turn results in a lack of credit history that makes it even more difficult to secure credit.

With traditional finance out of reach, consumers are also at risk of falling prey to predatory lenders.

Consequently, with little in the way of bricks-and-mortar banking infrastructure, these underserved rural borrowers are well suited to digital-first, tech-enabled lenders. Smartphone penetration is already relatively high – 60.7% – and these lenders are increasingly aware the cultural barrier to adoption is not a high one.

And when the need is there, customers will quickly adopt new patterns of behaviour, even among older customers who might not be classed as “digital natives”.

The ability of consumers to adapt to the changing paradigm is why the number of active clients of Filipino fintech firms grew from 1.7 million in 2016 to 54.1 million people in 2021.

Once customers start using electronic transactions, they will soon find they’re performing their tasks relatively quickly – and even quicker each time they do it. Simply by executing a transaction, they will get an immediate reward, which reinforces their behaviour.

Electronic transactions are usually executed from a smartphone using an app. But that is not the only way – indeed, rural financial services providers are introducing electronic channels to their customers using many different methods.

For instance, electronic transactions can be executed though a local agent network – for example, through local shops or a sari-sari convenience store.

The ease and convenience of digital finance essentially means there’s no easy way for consumers to return to physical banking – or even to predatory lenders. With millions of consumers already using fintech, digital and electronic banking is already becoming the default for everyone.

The power of partners: How to deliver to rural customers.

Although older rural banks and traditional financial institutions are adopting advanced new digital technology, they are facing stiff competition from a new breed of tech-first lender utilising a variety of third-party and proprietary banking and lending applications.

Tech-enabled lenders demand interoperability between these systems, through API-driven integrations. Even previously “low-tech” firms are embracing cloud-based platforms and API-integrated apps, increasingly aware of the enormous benefits these bring for growth and performance.

But with so many providers saturating the market, the value of a trusted partner becomes clearer.

To take their service to the next level, even the most advanced lenders they need a trusted technical integration partner, and a team with the tools to help adapt their API, train their staff, and launch their service.

Better still, they need a partner with a decade of experience delivering financial services to rural, underserved customers in desperate need of easy access to credit.

Oradian can be that partner. To find out more, get in touch with us now.

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