Sequoia-backed Tonik thinks big like its financial benefactor. If you look at interviews with CEO Greg Krasnov, you read about colossal potential markets. A January interview with Krasnov by Tech In Asia mentions an unsecured lending market in the Philippines estimated at a cool US$100 billion, 90% of which is unserved. For comparison, the total loan portfolio of the country’s banking system in 2021 was around 11 trillion pesos or US$197 billion.
Having judged that their target market is massive, Tonik is betting heavily on consumer lending. It’s not a bad idea; it’s a proven lucrative business segment. For instance, Ant Group’s consumer lending business was one of the main reasons it became a fintech juggernaut.
Tonik has launched four lending products so far. Quick Loan is a small-ticket loan available to customers within 24 hours, while Flex Loan offers a larger loan amount to consumers who are employed or have an ATM card. Big Loan, one of TDB’s more recent secured loan offerings, allows customers to borrow against the value of their home.
In December 2022, TDB further expanded its range of loan products when it acquired Philippines-based TendoPay. The firm works with companies to provide payroll-enabled financial solutions to their employees.
Tonik’s lending picked up significantly in 2022, and so did customer deposits, which rose 38% annually to $147 million. Tonik also recently hit the 1 million customer milestone. However, its losses also grew 28% to 33.45 million last year, according to regulatory filings.
To be sure, Tonik is growing fast, but so are its competitors. For instance, GoTyme Bank President and Chief Executive Officer Nate Clarke said in late February that the Philippine digibank’s user numbers have reached 250,000 since launching October 2022. If that rate of user acquisition continues, GoTyme may soon have more customers than Tonik. Its goal is to have 5 million users within three years of launching.
GoTyme reckons it may be able to onboard 250,000 users a month once it starts promotions. By “promotions,” we assume subsidies – as well as other perks. The digital bank launched its travel rewards partnership with Cebu Pacific and Go Rewards earlier this month.
As digibanks begin to compete for market share in the Philippines, Tonik will have to pay careful attention to its cash on hand, especially as its losses are already widening quickly. The type of promotions GoTyme wants to do could burn a lot of money quickly – especially when customers come to expect the subsidies, which is only to be expected when digibanks try to outdo each other on promotions to quickly sign up new accounts.