This article was originally published in Chinese on Momentum Works’ WeChat platform, and translated into English by the Momentum Works team.
At the beginning of 2021, GCash, the e-wallet under Philippine’s Globe Telecom raised US$175 million in capital from its Series D funding and became a unicorn in Southeast Asia. GCash has long been a part of Ant Group’s strategy to create a local e-wallet in Southeast Asia, and it has been receiving technical support from Ant as well.
While other e-wallets in SEA (approx. 800 of them) are burning capital and gaining less profit, GCash in Feb 2022 officially announced that they had a full year positive EBITDA in 2021, achieving its revenue goal three years in advance.
In the announcement, GCash released its 2021 total transaction volume, which is 3.8 trillion PHP (approx. US$73 billion). This is three times higher compared to its 2020 total transaction volume of 1.2 trillion PHP. By the end of 2021, GCash already had 55 million registered users, 4.5 million collaborating businesses, 290 GLife partners and 174,000 cash-in & out stations.
GCash provides regular services such as money transfer, bill payment, small loans, credit cards, etc. It also wishes to become a fully-functioning digital financial services platform just like Alipay. Within GCash, the small loan function seems to be performing quite well. Filipinos are known to have a habit of consuming beforehand – over 80% of adults have once borrowed money, and over half of them are recurring borrowers, so it could be said that this function is important for the people in the Philippines. There’s an estimated US$300 million outstanding loans. Though it’s small compared to a few Indonesian players, it is doing well in non-competitive Philippines.
There has been a lot of market speculation that GCash is associated with gambling, and recently, they were brought back to the hot seat again. Philippines senator, Francis Tolentino, claimed that underaged Filipinos were using e-wallets to engage in online cockfighting (or e-sabong). According to him, if an underaged teenager can engage in cockfighting through these e-wallets, they could also engage in illegal activities.
Filipinos’ fascination for cockfighting
Filipinos are known to be big fans of cockfighting and gambling. Today, cockfighting isn’t merely a leisure activity but it has grown to become a billion dollar industry. From establishing cockfighting competition committees to issuing certificates, it’s a smooth functioning chain.
How does cockfighting work?
Two roosters with blades tied to their feet are pitted against each other in the ring. The deadly fight lasts 1-2 minutes and the losers are sold as dinner outside the stadium.These simple yet bloody fights have been driving a good portion of the Philippine cash flow.
Due to COVID-19, online cockfighting has become popular in the Philippines, and the starting bet is as low as US$2. It was once illegal because of tax evasion, but now the PAGCOR (Philippine Amusement and Gaming Corporation) legalised it by collecting taxes and giving them license.
Here’s a screenshot of the GCash app’s interface. We can see that from simply 2 taps, we can access the cockfighting page. Thus, if one has a GCash account, they can easily place bets.
However, GCash has been publicly denying that a good part of their revenue comes from cockfighting. The elections are also approaching in the Philippines, so we can see there are some uncertainties here.
With the rise of digital banks and financial technology, the payments ecosystem in the Philippines has also evolved. Other than GCash, Voyager Innovation under Smart Comm has also received US$167M funding from investors including Tencent. These two companies almost dominate Philippines’ digital payments industry.
A total of US$345M was raised in the Philippines in the first two quarters of 2021, exceeding the total number in 2020. How was this active market established?
- The internet coverage in the Philippines is already 70% in 2021. It’s has one of the largest internet coverages in Asia.
- Filipinos are familiar with cross-border bank transfer because there are over 10 million Filipinos working worldwide, and many fintech companies use this as an entry point.
Growing trends and opportunities in the Philippines’ fintech industry
The pandemic has changed Filipinos’ payment habits – more people favour e-wallets now. However, there’s still a gap – until 2019, 70% of Filipinos didn’t have credit cards (so no credit). Now some fintech companies are grabbing the chance and providing these people with digital payment services without a need for credit, e.g. Mocasa. Momentum Works believes that the Philippines’ market has the potential to rise and now seems to be the time.