On recent side talks, Bangko Sentral ng Pilipinas (BSP) Deputy Governor Bernadette Romulo-Puyat gave a statement of wanting to unify collating credit information of Filipinos, which include credit score data. Puyat adds that if such measures are implemented, this act could encourage greater usage of banking services. Specifically, in loan applications, where before granting loans, loan applicants are first assessed based on required documents to see the applicant’s creditworthiness.
Traditional Banking System
The lending standards in traditional banks have always been conservative, as banks are regulated by governing regulatory bodies. Strict compliance and practice of regulations are expected for regulated banks to prevent money laundering and fraudulent activities from potential malicious actors.
For financial institutions, the pre-screening process of the client’s identity is part of the standard operating procedures; Know-Your-Customer (KYC) measure and Enhanced Due Diligence (EDD) are done for further verification when needed.
These existing measures aim to protect the financial regulatory system, and for traditional banks with lending services, more information is extracted from the loan applicants. The most common requirements are but not limited to – Age eligibility (Valid I.D.), Citizenship eligibility (Valid I.D. stating citizenship), Proof of Income (Minimum Required Income), and Proof of Employment (Certificate of Employment, Contract, etc.).
To apply for a loan, the applicant must first meet the eligibility and pass the document requirements and depending on the type of loan, the waiting time for loan approval can be expected by 2 to 7 banking days. For secured loans, certain cases may happen where approval can take up to 4 weeks.
Upon approval, the process does not end for the loan applicants. Repayment terms and conditions, setting of interest rates, loan size, and collateral requirements are just a few added requirements to maintain the applied loan.
What is Credit Score and why is it important?
A Credit score, in layman’s terms, is a three-digit score usually ranging from 300 (poor) to 850 (excellent). The scores indicate the loan applicant’s financial reliability in paying the requested loan sum amount. This implies that identified loan applicants with poor credit score range may find it challenging to be accepted for loan requests in comparison to applicants with excellent credit score ratings.
Credit scores are affected by records of payment history whether payments for financial obligations are done on time or not, the percentage of credit limit used to ensure that credit is used appropriately and not over extensively, well-maintained credit history, credit mix or the diversity of credit portfolio, and frequency of loan applications. These sure factors will contribute to the applicant’s credit score, and if all standards are met, a high credit score can be expected.
In the Philippines, credit scores are made available by few agencies such as Credit Information Corporation (CIC) and TransUnion Philippines. Through the request of financial institutions, these corporations provide information regarding the credit scores of loan applicants which ultimately help in the decision-making for loan approval.
PERA Program
The PERA program aims to bridge the gap between comprehensive financial background checks (i.e. credit history) and the ease of application for loans—meaning that the historically lengthy process of providing documents on the side of the applicant becomes less of a barrier to transacting with traditional financial institutions.
Digital banks that engage in lending have already adopted a more integrated method to check the financial standing of an individual. Where the person has all their transactions and verifications recorded electronically in the system, loan applications—including the limits allowed and the duration of the loan, among others—are automatically calculated, usually with minimal input from humans. There are, of course, processes such as the mandated Anti-Money Laundering checks, Enhanced Due Diligence checks, and so on as prescribed by regulations, but these are usually done at the start of the account creation, and revisited when certain parameters are exceeded (such as suspicious behavior).
According to BSP deputy governor Puyat, “Credit scoring is already being done by e-wallets. Whenever you use your e-wallet, that app records information related to your creditworthiness based on your payment behavior, such as how you pay your utility bills.”
Bangko Sentral ng Pilipinas is on its way to piloting the PERA program, with the aim of ultimately serving the unbanked who would have shied away from the documentary hurdles imposed by traditional loan-application processes.
These innovations empower Filipinos to engage with financial systems in ways that are faster, safer, and more inclusive.
DOPAY as an accessibly secure financial institution
DOPAY is an institution that allows individuals to trade, transfer, and affordably remit funds—services that are borderless. With these services, DOPAY offers the ease in which an individual can apply for an account. Through electronic means, an individual submits the required documents for due diligence checks; there is no longer a need to go to a physical location.
Once the individual has access to DOPAY’s services, they can rest assured that integrity is met with convenience. That way, there is a peace of mind for the security of transactions as is the case with larger financial institutions. The difference is the agility of DOPAY—other institutions take days to weeks to conduct checks. And if there are red flags raised, the process takes even longer.
At DOPAY, we are committed to ensuring the integrity and safety of the customer. We have a comprehensive, dedicated line of people that serve to protect you. Unlike GCash, there is the benefit of human quality assurance. Unlike traditional institutions, this is without the drawback of lengthy turnaround times. And as the underbanked—or otherwise—become more empowered by the benefits brought by DOPAY’s services, financial accessibility becomes paramount and real.
Licensed by BSP as an Electronic Money Issuer (EMI) and Virtual Asset Service Provider (VASP), DOPAY offers secure e-wallet and crypto wallet services.
With DOPAY’s crypto wallet, you can gain crypto rewards for every trade under our Trade & Earn program. Not just that, with DOPAY’s Refer & Earn program, Filipinos can unlock new doors for earning possibilities with every successful referral.
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