September 30, 2021 | 6:45 a.m.
The struggle Philippine Airlines [PAL 6.05] who is still under bankruptcy protection and still not redeemable for failing to submit audited financial statements, has announced that it has partnered with a company called “BillEase” to offer clients the possibility of using the BillEase platform to pay for flights in installments.
PAL described this as offering customers a “transparent and flexible means of payment” as it allows customers to take on debt to pay for flights without owning a credit card.
PAL said the BillEase option’s installment payment plan helps customers by “eliminating some of the hassle and added cost of planning a trip during the new normal.” BillEase charges customers a 3.49% monthly interest on borrowing up to 40,000 pesos, which can then be repaid to BillEase over three months (for new customers). Missed payments are subject to a penalty of 50P (per day).
Everyone keeps saying PAL should copy Cebu Pacific [CEB 38.90 1.14%], but not like that!
Predatory lenders like BillEase make the interest they charge seem reasonable by quoting a monthly rate, but when that rate is compounded and annualized, it turns out to be over 50%. And that excludes one-time installation charges, service charges, or late fees that the company might add to the customer’s bill.
This is very similar to the CEB’s use of the service funded by Gokongwei, Cashalo, I talked about hereWhile Cashalo’s monthly interest rate has dropped since this article was written (thanks to competition from other app-based lenders?), BillEase and Cashalo still charge over 50% per annum in the method of payday loan loans designed to attract as many customers as possible who can least afford it.
As a startup, BillEase targets the “unbanked”, which is the holy grail of PH fintech, and dresses its lucrative motivations with marketing based on “affordability” and “flexibility”. BillEase says its interest rate is “close” to that offered by credit card providers, but a recent BSP circular capped the interest credit card providers can charge at just 24% per year.
BillEase’s rate is more than 100% above the BSP’s capped limit for credit cards.
Any PAL investors who are still stuck in the stock will likely approve of any attempt by PAL to increase profits, but it seems difficult to see how charging 50% interest on airline tickets is a sustainable practice. which will increase recurring business over time.
Merkado Barkada’s opinions are provided for informational purposes only and should not be taken as a recommendation to buy or sell any particular stock. These daily articles are not updated with new information, so every investor should do their due diligence before trading, as the facts and figures in each particular article may have changed.