Nearly a Quarter of All VC Funding in the Philippines Goes to Fintech
by Fintech News Philippines April 3, 2024In 2023, the Philippines showcased its resilience despite macroeconomic headwinds that challenged the international venture capital (VC) scene.
New data released by local VC firm Foxmont Capital Partners and the Boston Consulting Group (BCG) show that VC funding in the country slid by a moderate 13.5% year-over-year (YoY) while deal counts increased by 15.7% YoY to reach a new all-time high.
These figures are in sharp contrast with global trends observed in 2023 according to CB Insights data.
VC funding in the Philippines, Source: Philippine Venture Capital Report 2024, Foxmont Capital Partners and the Boston Consulting Group, Mar 2024
VC funding in the Philippines declined modestly in 2023, reaching a total of US$960 million secured through 96 deals. This decline in VC volume was largely led by a reduction in growth and buyout deals larger than US$5 million.
The rise of deal counts, on the other hand, was driven by a focus on early-stage and smaller-sized rounds, which recorded a significant uptick. Deals in the US$1-5 million bracket grew the strongest.
Philippine VC deals by investment value (US$), Source: Philippine Venture Capital Report 2024, Foxmont Capital Partners and the Boston Consulting Group, Mar 2024
2023 also saw the Philippines take a larger share of the total funds raised in Southeast Asia, making up 12% of all VC money secured among countries in the region last year. This trend is attributed to the sizable number of regional funds that made their debut investments in the Filipino tech startup ecosystem last year.
Philippine share of venture capital funds raised amongst Southeast Asian countries, Source: Philippine Venture Capital Report 2024, Foxmont Capital Partners and the Boston Consulting Group, Mar 2024
Fintech Funding in the Philippines dominates other sectors
Data from the Philippine Venture Capital Report 2024 reveal that fintech was the favored investment target in 2023, accounting for 23% of all VC rounds with 22 VC deals. Fintech surpassed business-to-business (B2B) software-as-a-service (SaaS) with 14 deals, and e-commerce with 13 deals, the data show.
Fintech funding in the philippines capture a quarter of all total deals Source: Philippine Venture Capital Report 2024, Foxmont Capital Partners and the Boston Consulting Group, Mar 2024
Notable Fintech Funding Rounds in the Philippines
Notable fintech rounds secured in the Philippines last year include Netbank’s reported US$344 million Series A, and Advance Tech Lending’s US$16 million pre-Series A.
Netbank is a fully regulated Filipino bank, operating on a white-labelled basis. The company claims to be the first banking-as-a-service (BaaS) platform of its kind in Southeast Asia, offering businesses a range of services that simplify opening accounts, managing payments, the handling of small and medium-sized enterprise (SME) loans, card issuance and mobile banking.
Netbank says it turned profitable in March 2023, claiming that its deposits had grown by 14x, loans by 5.5x, and assets by 16x over the prior 12 months. It says it currently has around 20 different financial solutions in the pipeline.
Advance Tech Lending is a salary on-demand provider, offering short-term, multipurpose salary advances to eligible employees. The company issues instant salary advances with minimal interest, offering eligible borrowers the flexibility to advance up to 50% of their monthly basic salary, at any time.
Advance Tech Lending is partnered with over 200 companies, including major industry players such as Sitel Philippines, Inspiro, Cebuana Lhuillier, and ePerformax.
The Philippines’ fintech sector
The Philippines is home to nearly 300 fintech companies, with payments and digital wallets being the most prominent segment (45%), The segment is followed by lending and buy now, pay later (BNPL) with a 23% share, and remittances at 10%. The report cites date from Fintech News Philippines’ “Fintech Philippines Report 2023”
The Philippine fintech sector, Source: Philippine Venture Capital Report 2024, Foxmont Capital Partners and the Boston Consulting Group, Mar 2024 citing Fintech Reports Philippines 2023
In 2023, the Filipino fintech sector continued its expansion and was marked by notable trends. One prevailing trend involved fintech companies expanding their product ecosystems to enhance their value proposition. By cross-selling products and services amongst customers, these companies are simultaneously growing their user base and increasing customer stickiness and monetization through comprehensive digital ecosystems, the report says.
Philippine fintech companies expand beyond their original use case to multi-usage platforms, Source: Philippine Venture Capital Report 2024, Foxmont Capital Partners and the Boston Consulting Group, Mar 2024
Another trend highlighted in the report is the emergence of “verticalized” and tailored solutions, particularly in areas such as invoicing, accounting, credit and insurance for small and medium-sized enterprises (SMEs). This trend is arising as the market of digital services comes to saturation, providing companies in the sector with the opportunity to maximize usage and monetization within existing client bases.
Verticalized solutions in the Philippine fintech sector, Source: Philippine Venture Capital Report 2024, Foxmont Capital Partners and the Boston Consulting Group, Mar 2024
Digital banking is another sector that’s gaining popularity. Players in this segments are attracting customers with competitive deposit rates and wealth solutions, while monetizing through flexible lending solutions.
In this segment, Maya currently stands as the country’s leading digital bank, boasting a total of US$444.6 million in deposits and a total net of US$120.3 million in loans and receivables as of September 2023, the data show.
Maya is followed by Tonik with US$146.4 million in total deposits, and US$33.1 million in loans and receivables. Maya and Tonik claim 2.3 million and 1 million customers, respectively.
Deposit base and product offerings of digital banks in the Philippines, Source: Philippine Venture Capital Report 2024, Foxmont Capital Partners and the Boston Consulting Group, Mar 2024
Featured image credit: Edited from freepik
