“Coins.ph makes it very easy for people to access financial services directly from their phones. We’ve crossed half a million customers in the Philippines.”
This was Ron Hose in December 2016, founder and chief executive officer of fintech startup Coins.ph, during a video interview arranged by one its investors — Kickstart Ventures, a corporate venture capital firm headquartered in Manila and investing in digital startups globally.
At that time, Kickstart had gathered a selection of digital startup founders to talk about why it’s a good time to invest and grow a business in the Philippines. After all, the Philippines, as oft-repeated in business and tech conferences, is in a demographic sweet spot: a young, connected, and tech-savvy population driving the adoption of mobile and internet products and services.
The video, entitled “#investPH,” introduced locally-based digital startups already showing growth and progress — while not massive successes yet, they are generating real traction in the market solving deeply felt problems of customers in the Philippines and elsewhere in the world. The founders’ objective: attract investors to invest in digital startups operating in the Philippines.
What is Coins.ph?
It is a digital wallet and mobile payments app for the unbanked looking for life-improving financial services. It allows users to easily send or receive cash across online and offline platforms, transact bills payments across registered and non-registered users, or buy mobile load top-ups.
Lessons Learned: Bringing Banking to the Unbanked
In the time since that fortuitous video interview, Coins.ph has successfully carved out a path to scale and profitability, thereby becoming a compelling fintech player for emerging markets.
However, this is not to say the journey has been easy for Coins.ph — Ron and his team at every significant step towards building a valuable business meant responding to customer demands at a scale and speed uncommon in a highly-regulated industry.
So while there is truth to the saying “fortune favors the bold,” Coins.ph is a representation of “fortune favors the prepared.” Here now are three startup growth lessons that helped Coins.ph transform from crypto exchange services to a suite of mobile wallet and payments services:
Growth Lesson #1: Solve a real problem. The bigger the problem, the better the opportunity.
Founded in the Philippines in 2013 by Ron Hose and Runar Petursson – CEO and CTO respectively – Coins.ph was built to address banking for the next generation of Southeast Asia customers.
They assessed the emerging economies and came up with these numbers: for SEA’s population of 618 million, 59% were still unbanked and 95% without a credit card ownership. But most were online or owned digital identities e.g. Facebook.
In 2013 Philippines with a population of 100 million then, two out of 10 households were banked and one out of 20 Filipinos owned a credit card. Amazingly, four out of 10 Filipinos were on Facebook.
Given this socio-economic environment where the majority of the Filipino population is unbanked, Coins.ph created a free digital wallet app that allowed mobile phone users to conduct domestic and international financial services transactions such as remittances, instant person-to-person money transfers, bills payment, mobile load top-ups, etc.
By the fourth quarter of 2015, Coins.ph had signed up 270,000 users and was steadily growing; also, almost 24,000 Coins.ph subscribers were actively using the company’s suite of financial services monthly, thereby allowing Ron and his team to handle cash transactions in millions of US dollars each month.
In 2015, Coins.ph expanded to Thailand. Within the same year, it launched the first-ever instant blockchain-based remittance service for the benefit of Filipino OFWs whose relatives based in the Philippines could claim money remittances instantly through a bank ATM.
Growth Lesson #2: Differentiate.
Coins.ph’s stickiness as a product is anchored on two key pillars: a powerful technology at its core and ease of use/low friction for customer adoption.
First, blockchain. The use of blockchain as its underlying technology for the Coins.ph platform has allowed the company to provide instant, global cross-border settlement, and access to a global network of fintech services.
Second, great user experience. The team regarded user experience as a product, not a by-product of a great design. Onboarding of new customers became more seamless, despite operating in a highly-regulated industry where “Know Your Customer” or KYC is a regulatory requirement for financial institutions. With faster KYC from Coins.ph, it allowed customers to spend more time transacting on their app than learning how to use it.
In addition to creating a great product with effective user experience, the efforts of Coins.ph to proactively work with government regulators and other relevant institutions deemed likely to impact the financial sector’s growth in the future mattered to Coins.ph to the extent that it allowed its founders to discover and address risks to the business.
The recognition that Coins.ph received — the first company in Southeast Asia to be regulated as a Virtual Currency Exchange and Electronic Money Issuer (e-wallet) as well as the first virtual currency provider based in the Philippines to be issued the “Virtual Currency Exchange” license by the Bangko Sentral ng Pilipinas (BSP) — these serve as testaments to the product’s compelling value proposition, and their differentiation from the earlier mobile wallets.
Growth Lesson #3: Scale.
Coins.ph, which last raised Series A funding from a group of investors that included Naspers, Quona Capital, Pantera Capital, Kickstart Ventures, has wisely used its fresh capital infusion to deliver new and competitive products that grabbed market share at a faster clip versus the entrenched incumbents in the Philippines. Certainly, the team has proven the ability to deeply understand the market it serves, and is skillful in partnering with different ecosystem players, even competing ones, whose own products and resources e.g. deep talent bench, geographical reach, etc. complemented Coins.ph. As a result, Coins.ph was able to triple its user base from 1.5 million to 5 million users in under a year, and has developed one of the largest cash distribution networks in the country with over 33,000 partner locations nationwide.
The Way Forward: GO-JEK and Coins.ph working together
When asked how he feels about the GO-JEK acquisition, Ron replied that “it was clear to us that there were strong synergies between the two companies. Together, we can work on creating a cashless society built on the backs of our products without sacrificing our respective missions, visions, and values.”
Ron is also keenly aware of the public’s interest in the Coins.ph and Go-Jek partnership. He responded by retelling the reasons he shared at a local TEDx event some time ago about creating his fintech startup:
“There were a few things that excited me about the Philippines, which led me to establish a fintech startup here in 2014: (1) the economy was growing at 6-7%, faster than other developing markets in Southeast Asia but at the same time, a large section of the population was not included in that growth — this offered me an open area to create social good; (2) there was low penetration of technology, and how technology was being applied that will bring real impact and change in people’s lives; (3) the operating cost here was low, which was conducive for innovation since the cost of experimentation was not so high; and (4) the Filipino culture and mindset, which made me and continues to make me feel right at home.”
What this means for the Philippine startup ecosystem is that in the absence of infrastructure and systems that work reliably, cheaply, and serve the people at scale, there is an opportunity for startup founders to create and offer new solutions to old problems. In many ways, these gaps and inefficiencies are what make scalable technology innovations more valuable and more viral.
Meanwhile, Minette Navarrete, Kickstart president and vice-chairman, viewed Go-Jek’s acquisition of Coins.ph — funded by Kickstart in 2016 — a step in the right direction and should invite a closer look into the reasons that made Coins.ph a strategic acquisition for Go-Jek.
“While a lot of effort has been undertaken by many parties over the years, and we’ve seen progress in how both private and public sectors engage with startups, the universally accepted indicators that define a robust startup ecosystem have yet to manifest in the Philippines, i.e. high deal flow, large investment sizes, a critical mass of significant exits whether in the form of IPOs or acquisitions by global and regional giants like Amazon, or Google, or Go-Jek,” Navarrete said.
She added that “We’re thrilled for Ron and the Coins.ph team: the Coins.ph exit is an important win for the Philippines. For startup founders, it is both proof and a pathway for scaling technology solutions that create measurable market value; for investors, it’s concrete evidence that the Philippines presents attractive opportunities equally as a source of high-value investible startups as well as a compelling consumer market; and for the government and corporate sectors: the Coins.ph exit demonstrates how digital startups are not just a kind of MSME (micro-, small- and medium enterprise), so that the startup-specific policy and programmatic interventions that are being crafted now can genuinely increase tech startups’ chances of massive success.”
The Coins.ph represents one of the first large exits for a startup founded in the Philippines in recent years. It leads the way, for what we hope will be many more to come.