FinTechs Solving Problems
The Philippines boasts a growing number of FinTech companies seeking to tackle the issue of financial inclusion. Such companies are typically in sectors such as lending and payments, as these are key areas that effect the underbanked. One such company is Mynt: a FinTech whose two primary services are ‘GCash’ and ‘Fuse Lending‘. GCash is a micropayment service that allows consumers to buy prepaid currency in order to pay bills, send money and purchase goods amongst other services. Fuse Lending makes use of alternative data and credit scoring to offer both personal and business loans to primarily underbanked and underserved Filipinos. Mynt has hit the headlines recently too, after attracting an undisclosed investment in February from Ant Financial and Ayala. Ant Financial originated from Alipay – the world’s leading third-party payment platform – and is an affiliate company of Alibaba Group, and this move sees Globe – who are the Philippines’ largest telecom operator – retain a 10% stake.
I had the chance to speak to John Rubio, the President and CEO at Mynt, to find out more about the company and his views on financial inclusion. He gave me a brief overview of the country, which he says is a leading example of:
“traditional financial institutions’ inability to address the needs of an emerging country.”
John also provided me with some new statistics such as the country’s credit card penetration rate being at 5% and as high as 40% of municipalities not having a bank.
Mynt is leveraging technology to tackle problems that specifically relate to the financially excluded. By being able to send money from mobile wallet to mobile wallet for free, as well as paying bills and government fees via mobile in real-time, those who live in isolated areas and are constrained by high fees can improve their financial standing. On top of this, Mynt offers access to credit at rates 70-90% lower than 5-6 lenders, whom charge extortionate rates and operate without a permit or license. As recently as February, the government has begun a crackdown on these 5-6 lending schemes, which in total are valued at P2.4 billion across 30,000 operators. Lenders are now being given the opportunity to legalise their operations.
Continuing my chat with John, I asked for his view on the potential of FinTech for bridging the gap between the unbanked and financial services. His response was one full of optimism for the future:
“The potential is significant – it removes many of the friction costs that hinder traditional institutions from serving the vast majority of Filipinos. Mobile phone access and devices significantly drop cost to curve. Technology allows us to create alternative credit scores, alternative payment channels, etc., that drop the costs to customers, and make it much more convenient – oftentimes as simple as buying prepaid load at their neighbourhood store.”
For a country as large and rurally dispersed as the Philippines, FinTech is a prime example of how technology can create alternative solutions to everyday problems. if Mynt can continue its upward trend in the industry – and I see no reason why it wouldn’t, especially with its new financial backing – then there is a huge opportunity to better the financial prospects of large populations.
One of the sectors to have flourished out of the FinTech boom has been crowdfunding. Most recent statistics show the total global crowdfunding industry estimated fundraising volume at $34 billion, of which $10.54 billion was raised in Asia. I was intrigued when I came across ‘Cropital‘, a crowdfunding startup which connects potential investors to farming communities in need of capital. With agriculture being such an important industry to the Philippines, but with little room for growth without access to financial services, Cropital looks to fill this void by offering short- and long-term loans to farmers through the use of crowdfunding. Minimum investments start at just P5,000 (around £80), and the site has already attracted 100,000 unique investors with 80% sourced domestically.
So what does Cropital offer that’s unique? The firm aims to manage risks for both investors and farmers by verifying and selecting all farmers, giving access to crop insurance, and promoting diversification of crops to mitigate volatility of single crop markets. They go one step further than just providing a platform for funding by training farmers in financial literacy and basic business accounting, as well as ensuring farmers have access to professional agriculturists. Financial literacy is hugely important for the unbanked population, as simply having access to finance does not guarantee success. Whilst still only in Beta stage, both short- and long-term investments are fully funded, and founder Ruel Amparo told an interview with FT that they are projecting to turn a profit by the first half of 2018. Add to this the fact that their Co-Founder and CTO Rachel de Villa made Forbes Magazine’s inaugural ’30 under 30′ Asia list and it looks as if this Cropital could make a real difference to increasing access to finance.
My research on the Philippines revealed a variety of FinTechs looking to combat the problems associated with poor access to financial services. These companies are typically within the payments market, as they seek to disrupt the outdated methods for bill payments and transferring money. Ayannah is a FinTech provider of commerce and payment services. It operates SaaS platforms under the brand Sendah to allow B2B payments, B2C gift remittance for migrants and international and domestic remittance transactions. As recently as February, Ayannah announced a partnership with Bayad Center, the bills payment subsidiary of the largest electric utility company in the Philippines, to launch Juan Credit. This represents, what they say, a first for emerging markets in the form of an AI-powered credit scoring system for the unbanked. Through the use of unstructured data from sources such as bill payments, mobile tops, insurance premium payments and social media profiles, meaningful credit scores are constructed for those who would otherwise struggle to generate one. The JuanCredit online marketplace will allow banks and other financial service companies to access these scores and offer suitable products to those Juan Credit members.
PayMaya is a well established FinTech in the mobile money and payments space. The Smart PayMaya brand is a partnership with Smart, one of the leading telecom providers in the country, which offers a prepaid online payment app that enables payments online without a physical credit card, but instead using a virtual prepaid Smart MasterCard. PayMaya cuts out the need for lengthy application forms which often require proof of address and identification cards, as you are only required to download the app and register online which can be done in a matter of minutes. This provides more incentive to the unbanked population, who may struggle to provide all the details for a traditional application process. Another brand is Smart Padala, which targets the remittance market, claiming to be the largest remittance network in the Philippines with over 15,000 agents across the country. It also offers various services for both the banked and unbanked such as bill payments, airtime load selling, and reloading of mobile wallets such as PayMaya.
This concludes my visit to the Philippines. I have been fascinated by the circumstances that surround this country’s financial state, and I believe there is a huge appetite for innovation and change within for disrupting the traditional financial structures in place. If these FinTechs can continue their journey, and inspire others to do the same, there is hope for a more equal access to financial services for the vast amount of unserved and underserved amongst the population. I hope you’ve enjoyed this post, and look forward to reading my next one where I will be looking at FinTech and financial inclusion in the Indonesian archipelago.