Ant Group-backed GCash is one of the leading digital wallets in the Philippines. The 10 million downloads it recorded from January-September 2020 were the most of any finance app the Philippines, according to analytics firm AppAnnie. User growth increased more than 130% over that period. GCash says that its total registered users grew to 33 million in 2020 from roughly 20 million in 2019 while gross transaction value reached a record 1 trillion pesos ($20.8 billion).
Earlier this month, GCash announced it had raised more than $175 million in capital from the private equity fund Bow Wave Capital Management. Following that large fundraising round, GCash is now valued at close to US$1 billion. Bow Wave Capital's investment reduces the stake held by Ant Group from 46% to 40%.
In addition to its large war chest, GCash benefits from access to Globe's network of 100 million subscribers and various partnerships with incumbent financial institutions. GCash's partners include CIMB Bank Philippines, American Express and Mastercard.
The next step for GCash is to foray into higher margin financial services. There are numerous options on the table, including savings, credit, wealth management and micro-investing. It will be essential for GCash to move beyond payments if the company expects to reach profitability anytime soon. While its growth is impressive, the usual caveats with e-wallets apply: low margins, subsidy-fueled user adoption, and an uncertain value proposition.
Interestingly, the company does not plan to apply for a digital bank license in the Philippines. Instead, it aims to become a platform for other financial institutions. That sounds a bit like Ant Group's "techfin" strategy in China. And we know how that worked out. GCash should keep in mind that if a "platform" looks like a bank and acts like a bank, it probably will be regulated like a bank.
Platform companies with fintech arms like Grab and Gojek have a presence in the Philippines, but GCash's strongest competitor is actually another local company: PayMaya, Voyager Innovations' fintech arm. In April 2020, Voyager raised US$120 million in funding from Philippines' telecoms giant PLDT, Tencent, KKR and IFC World Bank for PayMaya's expansion.