Forget e-wallets. Ayannah taps agents to serve the unbanked and it’s growing fast
(Originally Posted on Tech in Asia)
The Philippines has seen over US$33 billion in remittances from Filipinos working overseas last year, and an even bigger domestic flow of over US$40 billion as people in the provinces move to metro areas to find work.
A huge chunk of those cash transfers has gone to families who struggle to manage their financial lives because they lack access to the traditional banking system.
Seventy-seven percent of the country’s population are unbanked. That’s the market that Ayannah has been serving with its stack of digital financial services.
Backed by venture capital firms like 500 Startups and Wavemaker Partners, the startup created a software-as-as-service platform hosting payment agents across the Philippines that can cash out remittances for families.
“The cost of sending money to the countryside used to be as high as 7% of the principal amount. But with more cash-out centers, the rates have gone down to 3% today,” Ayannah founder Mikko Perez tells Tech in Asia.
Connecting agents has made cash-outs easier, too. Banks and traditional money transfer outlets are few and far between in rural areas, so recipients often have to travel hours to redeem their money.
What Ayannah does is convert brick-and-mortar businesses like courier branches, pawnshops, pharmacies, and gas stations into cash-out agents, placing them along with established remittance players in one “interoperable” network. What this means is that money can be sent and received through any of the agents in the network. An app version also allows any mom-and-pop shop or individual with a smartphone to become an agent.
Ayannah’s platform doesn’t stop with remittances. There are other services like mobile top-ups, bill payments, and e-wallet cash-ins.
The idea is to make agents so ubiquitous that consumers can perform transactions from wherever they are.
Gaining serious traction
When Tech in Asia last caught up with Ayannah five years ago, it was still laying the groundwork for the business, seeing a few transactions here and there.
Today, with close to 10,000 agents serving 12 million consumers, transactions have gone up to more than 50,000 per day, Perez says. That gives Ayannah – which takes a percentage fee, the same as its agents – a steady revenue stream.
The company grew its revenue 12-fold between 2016 and 2019, and expects to become profitable by 2021 as new services give it a boost.
Ayannah has been collecting transactional data, which it’s now using to assess the creditworthiness of unbanked but “economically active” consumers, according to Perez.
Whereas other credit-scoring startups like Lenddo and Trusting Social analyze social media and telecom data, Ayannah claims to be the first to use actual financial data. The company has inked an exclusive agreement to use the data of the Philippines’ largest bill payments chain to complement its own.
Ayannah’s AI scoring system identifies new customers for financial institutions looking to offer products such as microinsurance and loans.
Global insurers such as Axa and several traditional and online lenders have come on board as partners. Ayannah has also roped in Malaysian banking giant CIMB, which earlier this year established its presence in the Philippines as the nation’s first all-digital bank.
“CIMB has no branches and ATMs, so an option for them is to use our network of agents to disburse loans and collect repayments,” Neil Palteng, senior product manager at Ayannah, tells Tech in Asia.
The startup has just rolled out a separate online marketplace called KayaCredit – similar to iMoney and eCompareMo – where consumers can apply and get approved for loans.
“But unlike our competitors, we’re an ecosystem. We provide our partners a complete solution, from credit scoring and lead generation to disbursement and payment collection via our agent network,” points out Palteng.
Cash is still king
The ultimate goal, Perez says, is to “build the largest interoperable agent-based network for delivering digital financial services across all channels – over the web, over the mobile phone, and over the counter – in the Philippines.”
Using agents to facilitate transactions seems counterintuitive, especially with the aggressive promotions of regional e-wallets like GrabPay and local ones like Alibaba-backed GCash and Tencent-backed PayMaya, which consumers can use to transact on their own. But Perez believes the cashless concept has a long way to go in the Philippines, so there’s a tremendous opportunity that his company can capture right now.
While e-wallets have started to see some traction, he says cash still accounts for 99% of transactions in the country and the majority of Filipino consumers still prefer this payment method.
Among the reasons why he thinks agents are still the best way to reach consumers are:
Mobile internet is just becoming available, especially in rural areas, which means people have yet to try e-wallets. Internet speed and stability also remain a challenge, so it’s hard to create the habit of paying via e-wallets
Many merchants don’t accept electronic payments yet. It’s still more convenient to carry cash
People in rural – and to some extent, urban – areas have low disposable income, so they don’t have enough money to store in e-wallets
E-wallet cash-in options are still limited
Ayannah faces off against Bangkok-based TrueMoney, which also makes use of a network of agents – mostly mom-and-pop shops – to deliver financial services in the Philippines. Owned by Alibaba-backed Ascend Group, TrueMoney has more than 20,000 agent centers in the Philippines and a total of 65,000 across Southeast Asia.
Preparing for the future
While Ayannah is keeping a close eye on its rival, Perez is confident that the market is big enough for more than one player to exist and says that his company’s offerings are more diversified.
In fact, Ayannah is about to roll out what it calls a “SuperPOS” – an omni point-of-sale device that allows agents and merchants to process:
mobile top-ups
e-wallet cash-ins/outs
domestic remittances
bills payments
insurance premium payments
loan disbursement and repayments
cash, card, and QR code payments
cash deposit and withdrawals
“So far this is the only device in the Philippines that can do all of these functions,” says Perez. “This allows us to cater to both banked and unbanked, and process cash and non-cash payment methods, which means we’re able to take advantage of the opportunity today and prepare for the future.”
It’s uncertain how much demand there is for the POS device, given that other players like PayMaya have launched their own devices rivaling Ayannah in this arena.
However, Perez says the cash withdrawal functionality is most handy because there aren’t enough ATMs across the Philippines – just as few as 29 per 100,000 adults. At the same time, it allows merchants to disburse their cash at a profit, when previously they’d have to pay armored car services to bring the cash to the bank.
“And the SuperPOS is just a fraction of the cost of an ATM machine,” he notes.
Making an impact
Perez has always wanted to make a difference in people’s lives. After his university days, Perez did volunteer development work for a few years before joining his family’s agriculture business. He eventually left the Philippines to pursue a masters degree at Harvard Business School and a career in investment banking at JPMorgan Chase in the US.
When he came back, he served as director at instant messaging app Chikka, which he helped steer to profitability before it was sold to one of the Philippines’ telco duopoly.
He used part of the money he earned from the sale to set up Ayannah.
“Things have come full circle for me,” he says. “I’m back to where I started. I hope to bring my experience in finance and technology to help build better communities.”
Ayannah is keen to adapt to other emerging Southeast Asian markets like Vietnam and Indonesia, which also have huge unbanked populations. The company has already started operations in Indonesia and will enter Vietnam in 2020.
To bankroll its expansion plans, Ayannah is targeting to close its series B round early next year. It has raised US$8 million to date.