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Business trends

Philippines' $30bn remittance market lures digital upstarts

App-based players shake up industry with low-fee transfers and shorter wait times

Western Union and Cebuana Lhuillier are using financial technology to grab a piece of the Philippine remittance industry.    © Reuters

MANILA -- The Philippines, the world's fourth-biggest remittance destination, has become a fierce battleground for homegrown startups and Western players seeking a bigger slice of the market.

Wielding perks like lower fees and shorter wait times, financial technology players are opening cracks in the dominance of traditional banks and remittance companies in a country that receives more than $30 billion a year from those working overseas.

"I decided to switch to an internet-based money transfer to lessen the hassle of waiting in line," said Joelyn Baluyut, a Philippine native working in Qatar who sends home about 3,500 rial ($950) per month.

Using a bank or remittance center could take 20 to 30 minutes, not counting travel time. Now, "it's fast and reliable," she said, adding that "I just need to deposit the money through my service provider, then transfer the money using the mobile application, and in an instant my family can receive it." Baluyut's family back home can take a confirmation code to a remittance center and leave with the money in 20 minutes.

The Philippines's portion of the $689 billion remitted internationally last year trailed only India, China and Mexico, according to the World Bank. Its tally has also been growing more steadily than those of the leading three countries, and its receipts per capita have cleared the $300 mark, presenting a juicy target for international payment players armed with cutting-edge technologies.

The Philippines is "one of our top remittance destinations in Asia," said Venkatesh Saha, who heads the Asia-Pacific expansion of the U.K.'s TransferWise, adding that the service's Philippines-bound remittances "more than doubled in the past year."

TransferWise, a so-called unicorn -- an unlisted startup valued at over $1 billion -- handles 4 billion pounds ($5.09 billion) in transfers worldwide every month. It links bank accounts in various countries and can fulfill international orders using money from a user in the same country, making a remittance in the opposite direction. It charges fees of about 1% -- far less than traditional competitors who might charge 8% to 15%.

Other Western players, such as smartphone-based TransferWise compatriot WorldRemit and U.S.-based Remitly, have established a lead, but businesses from Singapore and elsewhere are hunting for a way in as well.

For startups, the Philippines offers appealingly low costs and a swift path to getting services up and running. Though more than 60% of the population lacks a bank account, the country is home to over 18,000 pawnshops, which serve as makeshift banks of sorts. Partnering with these shops allows for the creation of cash transfer networks throughout the country.

Xoom, an arm of U.S. payments giant PayPal, offers cash pickups at 16,000 locations including banks, remittance centers and pawnshops, as well as free delivery services. It also lets users send money to bank or app-based accounts.

On top of its existing North American services, Xoom recently launched its service in the UK, Italy, Spain, and the rest of the Eurozone as well as in Canada, according to Julian King, vice president and general manager, in what he described as "big, important news for the Philippine diaspora."

Blockchain, the distributed digital ledger technology underpinning cryptocurrencies such as bitcoin, is also seeing more use in the Philippines. Companies such as and SCI Ventures offer app-based transfers that involve temporarily converting funds into bitcoin.

Interbank transfers rely on an international network called Swift, while remittance companies tend to have their own infrastructure, which add to costs. Blockchain's decentralized nature helps services using the tech keep fees to about 1% to 3%.

"If we were bigger, with more liquidity and more volume, then we can even cut down the costs," said Miguel Cuneta, co-founder and chief community officer at SCI.

The blockchain revolution looks set to gain a further boost from social networking giant Facebook's effort to break into the payments market with its own digital currency, Libra.

Traditional remittance companies are working to incorporate fintech as well. Western Union in April announced a team-up with under which the digital service's 5 million users could receive transfers through Western Union directly into their wallets on the app.

P.J. Lhuillier, the parent company of Cebuana Lhuillier, a major player in Philippine pawnshops, took a stake in SCI in June, likely seeing signs that competition was about to grow fierce. Market consolidation is "inevitable," said SCI's Cuneta, as "the market is very small and there are so many players."

Cryptocurrency and other financial technologies are still developing, and regulations and oversight tend to be slow to catch up. In 2017, the Philippine central bank urged cryptocurrency-handling businesses to keep watch for money laundering and other illicit activity. Authorities will continue to search for ways to help spread the technology while keeping an eye on its effects on financial markets.

Researcher Ella Hermonio in Manila contributed to this report.

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