Coins.ph: Anatomy of a Philippine digital startup success
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 from 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: 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.”
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.