Four years ago, an American information technology professional based in Silicon Valley packed his things and decided to fly to the Philippines where he did not know anybody. Sensing a great opportunity, he built a startup financial technology company that would eventually redefine the local financial sector, including the remittance business.
“We started with a very simple vision, which is how to help more Filipinos connect directly to financial services,” Ron Hose, the 38-year-old founder and chief executive of Coins.ph, says in an interview in Ortigas Center.
Coins.ph, a mobile blockchain-enabled platform which uses the underlying technology infrastructure of Amazon Web Services, enables Filipinos to move or transfer money at the least cost and easiest way, according to Hose.
With the use of a smartphone, it enables customers to remit funds from anywhere and anytime in the world to the Philippines, receive remittances, pay bills, purchase and top up phone credit and pay for goods and services with a virtual debit card.
Hose says access to capital and financial services is a real equalizer. “If you are an OFW and you are sending money back home and you are paying like 6 or 8 percent in remittances fee, it is like working one month a year for free. It should not cost that much to move money from one place to another. There is no good reason for it, not in 2017. When you make it easier for people to move money, then they can access services,” he says.
Hose says remitting funds through Coins.ph cuts the fees substantially. “If you are to send P1,000, you will be charged half of that for remittance fee. So you have little control for the expenses and how the funds are being used. With our product, you can control, you can send small amounts, because we don’t have to use the traditional setup in banks. Even if you want to send P100, you just pay a percentage of that. For peer to peer transaction, it is free. It is when you withdraw here that you pay the withdrawal fee,” says Hose.
“Overall, remittances cost about 6 to 8 percent. With us, what we typically see is around 2 to 3 percent as average cost. With the smaller transaction, it becomes more pronounced. We don’t have the fixed fee component. We have a lot of partners like banks, financial institutions, convenience stores, retail outlets. For banks, we support cashout to 30 major banks in the Philippines,” he says.
He says Coins.ph also makes it much easier to deposit cash and settle bills. “If I want to send funds through a BDO account or I just want to pay my rent or pay someone, you have to run and deposit to their account. Don’t do that ever again. Just use Coins.ph. It is convenience. I pay my rent, car bill, Internet bill and condo fees through Coins.ph. I just remit funds to their accounts. If you want to send funds for cash pickup, you can send to any major Smart Padala Center. If you try to send money through door to door, you can send to GCash,” he says.
Coins.ph also has a partnership with Security Bank that allows customers to send funds to an ATM, and the recipient can go to the ATM and collect the funds even without using an ATM card. “We send them a code through SMS. They put in the 16-digit code and they can collect the funds. A lot of customers are already using this and it is 24/7,” says Hose.
Coins.ph has built a network of multiple partners across 17,000 locations in the country, including banks, pawnshops, department stores and convenience stores. “What we really do well is making easy for people to move money, from one place to another, to make a payment, to send money from bank to bank, at the least cost and most convenient way,” says Hose, who was a founding partner at Innovation Endeavors and a co-founder TokBox, two Silicon Valley groups. He holds a Bachelor’s degree in Computer Science and a Master’s degree from Cornell University in New York.
Hose says from half a million customers in mid-2016, he expects “a few million customers” to use Coins.ph for financial transactions this year. Coins.ph facilitates millions of transactions worth billions of pesos each month.
His journey to the Philippines started four years ago, when he felt the need to build a company with a positive social impact. His research pointed him to Southeast Asia—the world’s fastest growing market. Among Southeast Asian countries, the Philippines caught his attention the most.
“I did a very systemic search. I was looking across Southeast Asia. I was looking market by market, investors, entrepreneurs, learning about every country and the things unique to it, and after doing that for a few months, it became very clear to me that the Philippines was the place I wanted to be in. I actually did not know anyone here. That was four years ago,” he says.
“Even though the economy here is growing very fast, at the same time people still lack access to basic services like healthcare, education, finance and commerce,” he says. “If you look at the Philippines, more people have Facebook accounts.”
Hose and his partners spent eight months studying the Philippine market, looking at different opportunities. “It is a great place to start business in, because it is a big market, there is a lot of things you can solve with technology, and it is English speaking. It is a good hub to service products for other countries in the region. But for me, there was another aspect to it, which is personal. Building a company is not like a two or three-year project. It is five to 10 years which is a significant part of your life. And I want to be somewhere that I actually like, where I personally enjoy living in. From day one, I really thought I blended in. Being here was a very important part of what we are doing. I don’t think I would ever think of building a business without committing to the country,” he says.
Hose toured around Metro Manila, including the slums of Tondo, and witnessed how helpless the poor people are. His market research of the Philippines highlighted one very important issue, which is the lack of access to financial services. “The thing that came back over and over is how difficult and expensive it is to access financial services. Even doing basic things like moving money around, like sending money to relatives to making payments, or paying your health or employees, it is very difficult. That’s where we centered our company. We saw a gap right in the market,” he says.
“In the Philippines, the official banking penetration is 30 percent. So more than 70 percent of the population does not have bank accounts at all. If you start deducting dormant accounts, it will probably fall below 10 to 15 percent. So that means 85 or 90 percent are not actively using bank accounts. We are just trying to bridge that gap. We are not like a disruptor company. We are an enabler company. Our goal is it connect the other 90 percent,” says Hose.
Hose does not want to call Coins.ph as a disruptor. “When we say disruptor, we think of a company that is trying to replace something. We are not trying to replace what is in the market. We are trying to make what is in the market work more efficiently. If a bank is only able to serve a million out of 100 million customers in a market, I want to figure out how to help them reach out to 99 million customers,” he says.
Hose says transferring money should not be hard and costly with today’s technology. That technology is cloud and mobile. “Being a fintech [financial technology] company, we use mobile very heavily. We use Cloud. We use blockchain to settle the transaction,” he says.
“We did a thing that is gonna change the financial industry and the thing that is enabling us is technology. It is mobile and cloud, those are the things that empower us,” says Hose.
Hose says the customer base of Coins.ph was growing faster than they anticipated, but Amazon Web Services enables the company to scale up immediately. “We get millions of requests on our servers everyday. It is very hard for us to anticipate growth. We thought December was going to be our strongest month. But January was even stronger than December. It was really hard to predict. What allowed us to move fast is how our underlying technology and infrastructure is built. Every thing we do is actually built in Cloud. We have been using AWS pretty much from day one,” he says.
Coins.ph has a 50-person team, supported by AWS infrastructure. “We are a small team. We have a limited number of engineers and we want to dedicate all of our work to making a better product for our customers. Maintaining infrastructure is secure. If we have to maintain all the certification and all the practices that Amazon has in its own data center in our own data center, that would require probably a team that is at least the same size of what we have right now just to do that,” he says.
Hose says with the help of AWS infrastructure, Coins.ph has gained the acceptance of the market and the regulator. “We were the first one. Everything we did was running ahead. The first thing we realized is that even though there was no regulation, we acted as though we were regulated. So we started implementing everything from Amla [Anti-Money Laundering Council] controls and KYC (know your customers). Subsequently, we applied for money transmitter license, which was the closest thing for us to be regulated. For me, this is about making sure our customers are protected and they can feel safe transacting with us,” he says.
Coins.ph acquired a remittance license from Bangko Sentral and registered with the Anti-Money Laundering Council of the Philippines last year. “We are regulated as a remittance agent. With the new regulation, they are saying that if you are doing this business, there are some things we need to follow, but at the same time, there are a lot of things we have been tackling over the last three years. So we came relatively prepared,” he says.
“Our acceptance and legitimacy is coming from our customers, primarily. Of course, it is very viable and important for us to be recognized by government and regulators. At the end of the day, the thing that is most important is the service we provide to our customers,” says Hose.
Hose says Coins.ph aims to have a few million customers this year, but the long-term goal is to enable every Filipino to have access to financial services. “Our goal remains the same when we started the company. We would be happy that by the end of it, basically every person has direct access to financial services,” he says.
He says the new regulation of Bangko Sentral covering virtual currencies is a recognition of the financial technology that shapes the industry. “We are very lucky because in the Philippines, we have a regulator [Bangko Sentral] that is very forward thinking. They take a lot of great care and caution with customer protection and ensuring the integrity of the system and protecting Filipinos from systemic risk. At the same time, they understand the value of technology and innovation and how we can actually help drive financial inclusion,” he says.
He says Coins.ph is reinvesting its revenue in research and technology to support the rapid growth of its customer base. “Operationally, we are generating positive revenue, but then we continue to invest heavily in R&D,” he says.
In summing up the contribution of Coins.ph to the Philippine financial industry, he says: “If you are making 100 payments today and you are sending runners to do it, you should not. You should come to us and we will help you do it more efficiently.”