The Philippines - An Emerging Fintech Powerhouse?
I just got back from three days in Manila - first time I've been in several years. If you haven't explored this market, you should - because there simply are not that many like it in the emerging world. The Philippines is largely English-speaking, 100 million strong (110 million if you count cell phone subscriptions), youthful, stable (relatively), and in love with consuming all things digital and Internet.
Here's the other reason you should explore it: there are several smart players entering the market right now with the objective of moving the massive market of unbanked consumers into financial relationships.
How big is this opportunity? At the upper end, in the entire country, only 10 million credit cards have been issued (2 each to the five million that have successfully applied). At the lower end, over 90% of the population is still buying their minutes using pre-paid cards, and doing business with loan sharks that can charge up to 20% per day.
Yes, you heard that right. One successful businessman I met with - the leader of one of several groups working to change this situation for the better - characterized this grey market industry for payday loans in a very simply way - "fixe pesos in the morning, six pesos in the afternoon".
Marry that with default rates for micro-payments in the low single figures - and this is a market ripe for change.
And not yet in the area of small ticket lending. The situation with the more than US$25b in remittances that arrive every year is equally awful - another person I spoke to told me the easiest way to imagine the effect of the fee structure of Western Union and other remittance companies is to think of it in the following way: if the person working abroad sends back all the money they make, the fees for sending it add up to almost the equivalent of working November and December for free.
Is this situation also not ripe for change? You bet. And if Western Union does not lead that change by systematically (over time) dropping their fees to 20% of what they currently are, and improving their brand likability, they will be gone in five years - you can mark that on your calendar.
The disruption is already taking root. In Europe, TransferWise is moving things in the right direction (I was recently in Tallinn and meet a couple of the guys at this company, based on Estonia - this really is the "next Skype", trust me) - they have a very clever marketing campaign going on right now, a singular focus, and a very simple model: don't screw the consumer. Spar.ro based out of Hong Kong is another company looking hard at this space, using Ripple at the core.
Locally, Singapore Telecom-backed Globe has some excellent plans for reducing the burden on the consumer as well. We met with Globe Telecom's Fintech Investments division and they have some very well thought-out strategies to move into remittance and lending in a way that could greatly benefit Philippine consumers by reducing their fees and waiting times. Plus, they have a lot more capability when it comes to figuring out who to lend to than most of the banks. Certainly more than Western Union.
Who else? Startup lenders Caribou Capital (a couple of ex-Morgan Stanley guys) are also entering the market, and looking at bringing better analytics (and terms) into play. Our own ApexPeak has three technology platforms that would enable better-informed and more secure lending, and our other fintech play Telr is perfectly positioned to license its superb tech into the Philippines.
I could extend this post into the world of digital media, customer service, and mobile content - three areas among many that the Philippines is starting to excel at... but I'll stop here, and leave you thinking about the possibilities afforded by disrupting the current ways people do business in this large market.
Think about it - how many markets do you know that are this stable, this big, this welcoming, have this much opportunity, and don't require you to translate your sales literature, or your marketing campaign?
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