Bitcoin startups are emerging across Asia as entrepreneurs begin to see bitcoin's potential to improve the region's inefficient payments infrastructure and bolster its relative absence of advanced financial tools.
One Asian nation that is increasingly active in the bitcoin space is the Philippines, which is being led by perhaps its most well-known startup, Coins.ph, a bitcoin exchange service and merchant processor that has so far inked two deals with major local merchants.
The company is led by co-founder and CEO Ron Hose, a graduate of Cornell, a founding partner at Innovation Endeavors and an established entrepreneur who previously co-founded Tokbox, a video communications services which was acquired by Telefónica Digital in 2012.
While Coins.ph began trading late last year, the actual exchange launched publicly in February. To date, Hose told CoinDesk that he's pleased with the results, stating:
"In terms of volume, we have been doing pretty well in growth so far – high double digit, triple digit growth which is a very encouraging sign. We focus on building trust with customers through fast customer service."
Hose is also adamant in his belief that bitcoin can truly help consumers in the Philippines, explaining:
"In contrast to developed countries, where bitcoins as a payment method are more of a novelty – here it is serving a real problem. For instance, credit card penetration in the Philippines is 3%. Only three out of 100 customers that land on an e-commerce site have an immediate way to pay for it."
Because emerging markets are different than developed countries, Hose explains, Coins.ph had to provide a positive customer service process, one customers could trust to buy and sell bitcoin.
Building trust door-to-door
This emphasis on putting a trusting face to bitcoin's advanced technology has lead Coins.ph to provide services that would perhaps be uncommon in other markets.
"As a consequence, we built out a physical network and actually deliver cash through retail locations. We even conduct door-to-door deliveries, too.”
The CEO is also looking to build on this trust by listening to the needs of the local market.
Because the team has an active exchange, they can now see what customers use it for and have begun building a second layer of applications on top, creating banking services for those outside the traditional financial system.
Here again, Hose is taking aim at what he views as an underdeveloped e-commerce infrastructure, comparing his service to other market alternatives:
"[With] other [services, you] have to travel to a bank for 45 minutes on bus, wait in line and then return back on the bus. Before you know it, it takes three hours to pay for something online.”
Remittance within reach
According to Hose, there is even a larger pain point: transfer of money from other countries.
The Philippines one of the largest recipient for remittances in Asia and it was estimated that, in 2010, migrants sent around $21.3bn back to the country.
A large portion of these funds are going to people who do not have bank accounts and thus have to collect money in person at retail locations like Western Union, consequently paying an average of 9% in fees.
“The reason they pay this 9%,” explained Hose, “is because they don't have a bank account and likely will never have a bank account because they do not have enough savings. Banks have a cost structure (location, tellers, rent) and if you do not have sufficient savings on the first day when you open an account, the bank is already losing money."
Hose believes that bitcoin's ability to harness the power of mobile devices, however, will set it apart.
"This pain point is an area where mobile banking and bitcoin can help out. For instance, if a relative abroad sends money to you and you have to pay a transaction fee to a retail location, then that is equivalent in three-to-four days of income that you paid just to pick up your money.”
The way the company deals with regulatory issues, he said, is part of what differentiates his team from other local competition: "We have a well-seasoned Silicon Valley team. And even though bitcoin is not yet regulated in the Philippines [...] we treat it as if it was regulated. We work to comply with industry standard KYC/AML regulations; we are self-regulated and assume that we are being regulated."
Although the Philippines formally issued a warning against bitcoin in March, the country's lawmakers have not been quick to provide clarity as to how the local bitcoin ecosystem should operate.
Hose said this has brought new challenges his team is working to solve:
“There are definitely a lot of very particular challenges related to working in an emerging markets (for example, there is no automated way for us to do bank-to-bank money transfers here, we actually have someone going to the bank, withdrawing cash, and depositing it [in another bank].”
The team launched in the Philippines, however they see themselves as a regional player, aiming towards providing similar services to other markets, and expanding into places like Thailand, Malaysia, Indonesia and Vietnam.
In addition to a foot network, the team is still quite lean, comprising of around 10 people – one half in engineering and the other half in operations.
To accomplish its goal domestically, the team has built a large physical network and the next step is opening up this network up with an API (using a 'sneakernet' model) providing bitcoin ATM makers the ability to use this infrastructure to send money anywhere else in the Philippines.
Hose noted, "users can put in who they want to receive the funds and when they want to receive it. Next day delivery. We have providers that can do same-date, however we only guarantee next day as it is important to not overcommit to our customers. Part of providing good service is giving people the proper understanding what will happen and standing up for it 100% of the time".
Concluding, Hose mentioned he was recently on a panel in Singapore, and was asked what is going to drive bitcoin adoption.
In his view, the key will be finding use cases for the technology:
"It must solve a real problem; there has to be something that is painful enough to convert, somewhere there is enough friction. The thing about emerging markets is that pain exists – you don't have a bank account or you have to pay 9% to transfer money to your family – so it is much easier to make that leap."
From there, he said, adoption should follow, adding:
"And if we can make it so [a customer] had a positive experience, then through word-of-mouth [their friends] have a reason to try and use it as well."
Image via Coins.ph