How are Mynt's prospects shaping up?

Written by Kapronasia || April 13 2022

Ant Group and Globe Telecom-backed Mynt was the Philippines' one and only unicorn until April 12 when Voyager hit the milestone. Mynt reached the status last November after raising US$300 million from global investors including Warburg Pincus and Insight Partners. Mynt made good on its promise to become a “double unicorn” by reaching a US$2 billion valuation. While its long-term prospects in the vastly underbanked Philippines look good, questions remain about Mynt’s business model and the timing of an eventual IPO.

Mynt’s flagship platform is the e-wallet GCash, which has 55 million registered users recorded 3.8 trillion pesos in gross transaction value last year. It also serves about 4.5 million merchants and social sellers. Meanwhile, in addition to payment services GCash offers credit, savings, insurance, loans and investments.

We know, however, that a large user base and a wide variety of financial products do not guarantee success for a fintech platform company. India’s Paytm, with 450 million users, is a case in point. Lacking a banking license – the key to the most profitable products – Paytm has expanded into many different segments of financial services, and has ended up specializing in nothing – at least not yet. Its stock price has also been in freefall for months, having dropped more than 60% since the company’s November IPO.

In GCash’s case, the company may also run into trouble if it forgoes a digital banking license, especially as it now faces five licensed digital lenders able to offer a full suite of financial services products directly to their customers.

“Even without the digital banking license we are already able to offer a full suite of financial services,” Mynt CEO and president Martha Sazon said in November, adding that GCash’s strategy allows it to be “more flexible--whether we want to originate our own loans or partner with other banks.” While GCash can offer loans of its own now, they max out at 25,000 pesos (about US$480).

By foregoing the digital banking license, Mynt may indeed be able to offer a wider variety of financial products to its customers through partnerships, but it could be challenging to achieve profitability with those partners all needing to be paid for allowing Mynt access to services it cannot offer independently.

Like many platform companies these days, GCash is trumpeting its EBITDA performance. On an EBITDA basis, GCash says it achieved profitability in 2021. Of course, that is not the same as positive net income.

Perhaps recognizing Mynt still needs to tweak its business model, CEO Ernest Cu told Bloomberg in a March interview: "We want to diversify our revenue. We just don’t want to be in payments, phone loads and bank transfers. Right now we are still building our business. When we are done and ready we’ll be doing the IPO.”

Ultimately, Mynt may prosper simply because the market offers so much low-hanging fruit, the company is well funded and the GCash brand has achieved some good traction in the market. About 70% of the Philippines’ 67 million adults are either unbanked or under-banked. Only about 15% people have formal loans, less than 5% have credit cards and even fewer have access to insurance.