Although majority of the Philippine population remain unbanked, the rapid growth in the population of the smartphone users has opened up alternate opportunities for their financial inclusion. In fact, it is the country’s financial technology (fintech) startups, that will lead over 70 million unbanked Filipinos (70 per cent of the country’s population) to a new digital payments landscape, says Satoshi Citadel Industries (SCI) co-founder and CEO John Bailon.
Many Filipinos are gaining access to the latest financial services approved by the Philippine central bank with the use of smartphones whose penetration is predicted to hit 40 per cent by end of 2015, according to network equipment firm Ericsson. The Asia Digital Marketing Association reported in 2014 that Internet users in the Philippines have reached 37 million, experiencing 531 per cent growth in the last five years.
SCI is tapping the personal remittances (from overseas Filipino workers or OFWs) space, which stood at $13.4 billion in the first half of 2015. Of this, only $2.2 billion were coursed through banks. OFWs through their remittances continue to be major contributors to the country’s GDP growth.
The fintech firm has created a mobile money app that allows its users to store their money in their smart phones in Philippine Peso currency. They transmit these funds via the digital currency Bitcoin which makes their money compatible with any Bitcoin accepting merchant all over the world.
Last April, SCI acquired BuyBitcoin.ph, the first Bitcoin exchange in the Philippines. BuyBitcoin.ph is a peso to bitcoin “over-the-counter” exchange which allows Filipinos direct access to buying and selling the digital currency.
In an interaction with DEALSTREETASIA, Bailon debunked “myths and legends” that had surrounded the Bitcoin currency, while sharing his experience in running a startup company.
How do you see the fintech business in the Philippines today in terms of prominence and scalability?
Fintech is a very important industry because it is what will usher in the Philippines, a digital payments landscape. And there is definitely room to grow, especially if the dichotomy is being boosted by smart phone and internet connectivity penetration, we will soon see new types of participants to the digital economy through applications that take advantage of an interconnected world such as Bitcoin.
What are the issues that Satoshi Citadel is addressing in the local fintech space?
We are actually solving three different problem points for Filipinos. That’s remittances, banking and digital payments. Remittances comprise of $27 billion in international volume and $40 billion in domestic volume and the average fees imposed is around 5-8 per cent. We offer 0 per cent fees.
There are now a number of fintech startups in the Philippines. Are these innovations scalable and applicable to other markets around the world?
Definitely scalable and applicable to emerging markets. But more importantly, the innovations that are coming up right now actually bridge the developed world to the developing world. More specifically, the beauty of Bitcoin and the blockchain technology is that it has taken care of all the heavy lifting and the complications in creating fintech products, which leapfrogs old systems. As a startup, this has given us the much needed boost to gain momentum in an industry that would otherwise be exclusively dominated by giant corporations with deep coffers.
Do banks and fintech startups work together in the Philippines? Is it really necessary?
Yes. It is necessary, of course, in any real business to have a good working relationship with banks. There is a misconception that fintech startups are out to replace banks, and apart from some exceptions, the reality is that fintech startups are here to improve on different aspects of finance such as accessibility and affordability. These don’t necessarily replace the services that banks offer.
There have been a number of issues raised against Bitcoin, can you identify some and explain them?
Yes. One of them is that Bitcoin is a pyramid scheme or a get rich quick scheme. There is a growing number of scams that try to ride on the coat tails of Bitcoin’s fame by claiming that Bitcoin is some sort of get rich quick secret scheme. No! Purchasing or “investing” in bitcoins, by all intents and purposes, will not make anyone rich quickly. Bitcoin is both a value transfer network and the digital currency within that network.
Second would be, Bitcoin is illegal. This is brought about by the cryptocurrency’s association with illicit items such as drugs. The fact is, except for Bolivia and Ecuador, Bitcoin is legal to own and use in any other country in the world.
Third is that Bitcoin is not backed by anything and so has no intrinsic value. This may be true, but so is the US Dollar, technically speaking. Sure, the US government backs it, but the point is, a currency’s integrity is directly attributed to its backing entity.
I would then argue that the what’s backing Bitcoin are the thousands of people who contribute their computing power to mine or support the network and the millions of people who own and use Bitcoin.
Can you talk about a critical failure at Satoshi Citadel that you were able to quickly adapt to?
At Satoshi Citadel, we like to be versatile, and failures are a huge part of being a versatile company. We’ve launched seven products in our first year, and have consolidated them into four products right now. I’m proud to say that when we do fail, we fail fast and we learn from it. One recent failure that comes to mind is how we dove into a project with the wrong technology. The decision to restart from scratch versus continuing on with the months of work that will end up being rewritten after version 1 was a very difficult decision for me personally but I had to make it.
You are involved in other businesses. What are they and how have these experiences helped with leading Satoshi Citadel thus far?
I’ve run a few small businesses in the past and continue to hold board positions in a few others. These businesses are in the events, food and beverage, manufacturing and distribution industries. I’ve learned a lot from my past successes and even more from my past mistakes. From handling different types of personas, to reacting to market, and regulatory forces, and a lot of intangibles that you will never read about in the books, I’m confident that with all these experiences under my belt, I am able to jumpstart a lot of the startup mishaps that usually come in tow with starting a new company.