Fintech group Consumer Lending Association of the Philippines (CLAP) and its member firms are preparing to collaborate with the Bangko Sentral ng Pilipinas (BSP) and the Securities and Exchange Commission (SEC) to curb the rising financial fraud cases plaguing the lending industry.

“Many of us already have real-time fraud management systems (FMS) in place. Where the rules are applicable to us, I would say we have a commitment and a promise to comply,” CLAP President Arianne Ferrer said last week.

Ferrer designated this as CLAP's “first action item for next year” as the group seeks to operationalize the Anti-Financial Account Scamming Act (AFASA) with the BSP and the SEC. This commitment aligns with CLAP's goal of becoming the most regulation-compliant association in the financial system.

Moritz Gastl, general manager at fintech firm Tala, noted the lending industry possesses stronger FMS, given their operations in markets where financial crimes are often more sophisticated than those in the local Philippine market.

However, Gastl cited the persistent major concern: ID verification. This is largely due to the lack of a universal ID, such as the national ID, that customers can consistently use. The production of the national ID has been stalled and pushed back indefinitely, leaving applicants waiting.

Tala estimated its own fraud losses in the “single-digit” millions in US dollars, with similar impacts observed across other platforms.

Data from the Cybercrime Investigation and Coordinating Center (CICC) showed that the Philippines last year ranked second globally for suspected digital fraud rates at 13.4 percent, which is 1.5 times higher than the global average of 5.4 percent.

Citing survey data, CLAP reported that fraud attacks have eroded customer trust by 61.9 percent and have resulted in significant monetary losses for clients.

Account takeover fraud, primarily from phishing and stolen credentials, led to ₱409 million in losses, according to recent data.

Investment scams targeting overseas Filipino workers (OFWs) have caused over ₱100 billion in losses, severely impacting families reliant on remittances.

The recent slump of gross domestic product (GDP) to four percent is viewed as having a direct link to the lending firms’ business, as economic growth is typically a lagging indicator for the sector.

Gastl added that consumer price movements directly affect customers’ ability to repay loans, as many Filipinos live paycheck to paycheck.

Paradoxically, CLAP explained that economic downturns caused by the impact of typhoons and earthquakes can actually increase loan applications, as companies respond by providing flexible, targeted products.