What Matters for Consumer Credit Choice? Evidence from the Philippine Digital Credit Market

Digital credit—short-term, high-interest loans offered via mobile channels—has surged over the past decade, reaching millions in the developing world. However, much like payday loans in developed economies, it remains unclear whether its liquidity benefits outweigh the risks of overindebtedness and financial distress. Using an online discrete choice experiment with digital credit users in the Philippines, we examine how disclosures about price and non-price attributes affect consumer choice. We find that standardizing contract terms across products leads consumers to choose loans with lower interest rates and higher probability of approval at the expense of longer time to disburse and higher documentation requirements. Presenting interest rates in effective (compounded) or nominal terms makes no difference but ranking by a selected attribute leads to a more favorable product choice. Typical consumers are responsive to disclosures about late payment fees but not overconfident consumers. We argue that overconfidence can reduce the effectiveness of attention-based interventions and consumers’ revealed risk profiles.