While at tech conference Geeks on a Beach on Cebu Island, Philippines, we’ve met with Coins.ph founder Ron Hose, as well as a few other players of the local digital currencies scene. Even flying in to Cebu, a geek on the next seat was coding on his own bitcoin project.
Light financial regulation + remittances + mobile phones = Bitcoin opportunity in the Philippines
Many agreed in the conversations that the Philippines could lead the way in the field of digital currencies, for three main reasons.
- First, the absence of regulatory constraint – so far – on the kind of transactions bitcoins involve, from remittances to micro-payment and loans. The political trend also seems positive with politicians such as Senator Bam Aquino, a former entrepreneur himself aged just 37, sending strong signals to the tech ecosystem, including a startup bill which should pass in the coming months.
- Second, with one of the largest remittance market in the world, third just after China and India. In 2013 alone, more than $25 billion were sent back home by some 12 millions overseers Filipino workers, living in North America, the Gulf countries, and Asia. On these, Western Union takes an average 10% fee. Bitcoin exchanges, with fees ranging from zero to one percent, could release about $2bn in the economy.
- Third, because Filipinos are, as most emerging markets, heavy users of mobile phones. Ron Hose spent a few months travelling around the archipelago, and noticed that “lots have cellphones, even in the remotest islands [The Philippines have 7 000 “large islands”], but sending, lending or paying is still a pain with lots of steps and transports involved”.
The vision of Coins.ph: reaching the 75% unbanked Filipinos
A few other stats show how ripe seems to be the market for a new type of currency. Only 25% of Filipinos have a bank account, and less than 5% have a credit card. “It’s not going to change”, says Ron Hose. “Banks have huge costs, such as security, offices, staff”. They have nothing to earn from offering services to Filipinos households with $440 revenues on average (Census.gov.ph, 2012), and little no non-existent saving capacity. “A bank would lose money on any new customer of this type”, he adds.
Despite this, consumption of financial services is pretty high in the Philippines, with rip-off rates, from Western Union’s 10% averages to traditional face-to-face loans with 20% rates. Even telcos apply about 10% fees when people send money through the local mobile money system Gcash, operated by Globe, the dominant operator.
Not only is there room to disrupt these rates, but also the speed of transactions. “There’s no savings here. When you need money, you need it fast. You would typically ask your family first, and then maybe a lender. Being poor is expensive”, says Ron Hose.
Remittances, e-commerce: two first fields of application for Coins.ph
The startup, founded in 2012, is now engaging in two fields to develop the culture of digital currencies in the Philippines.
First, with remittances, both from overseas, and inside the country itself. Unofficial estimations assess than the money sent by Filipinos within the country might amount to $50-70bn each year, two to three times as big as the remittances from overseas workers.
Sending money through Bitcoins make it faster (no need to go to the local branch of the remitter or bank), easier (no need to be in the same “closed garden” on the sender and receiver side, such as a telco or a bank), and with time and new services, less need to cash in and out could make it virtually free.
More, from a sender point of view, the savings can also be calculated in man-hours. Say you send $200 from Singapore, where Filipino maids typically works 25 days a month for $500 on average. The cost of a transfer at 10% average is the same than a day worked “for free”.
E-commerce is another big market where Bitcoins and digital currencies can help more Filipinos pay for goods and services. If you don’t have a credit card to pay with, the customer journey looks like this:
- you research and “buy” online
- you get an invoice to be paid at your local bank with a time limit.
- you travel to your bank through traffic jams and queues
- once you get the payment receipt from the bank, you scan it/send it to the merchant
- you then get delivered
So far, Coins.ph makes Bitcoin payments possible with two large e-commerce platforms in the Philippines (MetroDeal and CashCashPinoy), as well as with Bench, a clothing and lifestyle brands whose giant ad billboards can be seen alongside Manila’s highways.
A typology of Bitcoin users in the Philippines
Based on almost two years of data, Ron Hose sees two types of users of digital currencies in the Philippines:
- Big clients who buy Bitcoins in large quantities to pay with the currency, such as employers paying their staff in Bitcoins (it’s the case of Coins.ph, to save time and rates of bank transfers or Paypal fees).
- Grassroots people sending about 1 000 pesos each time ($22 as of August 2014), with fast cash in and cash out as again, inexistent savings make it necessary to recover a high fluidity of payments.
When asking Ron Hose what could make his company crash (sorry for the French pessimism here!), he’s quite confident that “nothing can beat digital currencies. If you’re not using them in 10 years, you will look like someone today using cassettes and a walkman”.
The roadmap of the company is showing a lot of strengths too. Coins.ph just launched Thailand’s second Bitcoin exchange, and is developing quite a few very cool products for the next few weeks (you can sign-up to know about their next surprise, to be released on September 8th).
Overall, Coins.ph story is not without reminding us of what we’ve seen during the Afrikoin conference in Nairobi, Kenya, a year ago. Similarities between these two high remittance countries exist, as well as a rising ecosystem of apps, developers, and communities within the field of digital currencies.