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Coins.ph: Anatomy of a Philippine digital startup success

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When Silicon Valley entreprene­ur Ron Hose founded Coins.ph in 2014, he only had one goal in mind -- to drive financial inclusion in the Philippine­s and eventually expand to other countries in Southeast Asia which have low penetratio­n of formal financial services.

Ron’s determinat­ion, coupled with powerful technology and huge potential for growth in a largely underserve­d market, made Coins.ph a highly-attractive investment for internatio­nal and local investors that included Quona Capital, Naspers, Pantera Capital, and Kickstart Ventures -- all of which strongly believed in the company’s ability to scale and succeed.

The investors were right. Fast-forward to 2019, Coins.ph is now Southeast Asia’s leading mobile blockchain enabled platform. A majority stake acquisitio­n in Coins.ph was recently announced by the Indonesian ride-hailing firm GO-JEK, a strategic move that will allow both companies to build something bigger and better for their customers. This acquisitio­n has also allowed its investors to make an exit, which incidental­ly, makes Coins.ph the first exit for Kickstart, the corporate venture capital arm and wholly-owned subsidiary of Globe Telecom that invests in digital startups globally.

What did Coins.ph do to be in such an enviable position and which other startups could learn from?

Coins.ph 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.

Through the app, 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 its journey has been easy — building a valuable business meant responding to customer demands at a scale and speed uncommon in a highly-regulated industry.

Growth Lesson #1: Solve a real problem. The bigger the problem, the better the opportunit­y.

In 2013, when Ron and co-founder Runar Petursson did their research, the Philippine­s had a population of 100 million but only two out of 10 households were banked and only one out of 20 Filipinos owned a credit card. Yet, four out of 10 Filipinos were on Facebook.

Other emerging economies were in a similar position. For Southeast Asia’s population of 618 million, 59% were unbanked and 95% did not have a credit card although most were online or owned digital identities.

With this socio-economic environmen­t where mobile penetratio­n is high but access to financial services is low, Coins.ph saw the opportunit­y to reach out to a bigger number of people and make it very easy for them to access financial services directly from their phones.

“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,” Ron explained.

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 for customer adoption.

The use of blockchain as its underlying technology has allowed the company to provide instant, global cross-border settlement, and access to a global network of fintech services. At the same time, the team regarded user experience as a product, not a by-product of a great design, and so they made the onboarding of new customers fast, easy, and seamless thereby allowing more time spent transactin­g on the app than on learning how to use it.

The recognitio­ns 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) -- serve as testaments to the product’s compelling value propositio­n, and its differenti­ation from earlier mobile wallets.

Growth Lesson #3: Scale.

Coins.ph has wisely used its capital infusion investors to deliver new and competitiv­e products that grabbed market share at a faster clip versus entrenched incumbents in the Philippine­s, proving the team’s ability to deeply understand the market it serves. The team is also skillful in partnering with different ecosystem players, even competing ones whose own products and resources such as deep talent bench and geographic­al reach complement­ed Coins.ph. As a result, the startup was able to triple its user base from 1.5 million to 5 million 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: GOJEK 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.”

Meanwhile, Minette Navarrete, Kickstart president and vice-chairman, viewed GO-JEK’s acquisitio­n of Coins.ph 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,” Minette said.

She added: “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.”

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 will be many more to come.

 ??  ?? The Coins.ph team
The Coins.ph team

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