Offline-to-online payment solutions to shape emerging markets: Ayannah

By: Terence Ng

To anyone familiar with the Asian fintech and remittance world, Ayannah can be considered a household name. Started in 2009, Ayannah offers ways for underbanked people to transact online without going through banks, and also provides an e-commerce gateway that lets guest workers send goods to their relatives back home.

Currently, Ayannah offers three finance and payments services: e-commerce gateway Sendah, peer-to-peer money exchange platform Sendah Direct, and prepaid credit and virtual goods store Gamenah. Recently, the company received a round of investment from GREE Ventures, adding to the US$4.5 million in seed funding it had earlier received.

Here, in collaboration with GREE Ventures, we, at e27, bring you an interview with Ayannah’s Founder Mikko Perez as he talks about his entrepreneurship journey and what he sees in the future of the payments industry. Prior to founding the payments startup, Perez served in VC firm Next Century Partners, as well as headed the finance and business development departments at mobile tech firm Chikka.


How have your experiences at Next Century Partners and on company boards contributed in setting up and growing Ayannah?

When I was working in the private equity field, I learned about different industries, as well as how to evaluate businesses and entrepreneurs. These insights helped when I switched sides and became an entrepreneur, as they contributed to making Ayannah an attractive, investor-friendly startup.

What led you to come up with the idea of Ayannah?

Before Ayannah, around 2002-2007, I was involved in mobile startup Chikka and also was an investor in other mobile startups. I saw that the long-awaited convergence of web and mobile was already happening. I saw that there were four ways to make money on the Internet — advertising, content, commerce and payments. At that time, advertising-based revenues were still not significant. Digital ad spend in the Philippines was a tiny US$2M. Even now, most of the digital ad spend is cornered by Google and Facebook.

It was hard to sell or distribute content because of the low Internet penetration at that time; there were very few smartphones then and digital commerce was in its infancy but held great promise. But the lack of trust and confidence in existing payment options plus the reality that most people in the Philippines were (and are) unbanked were significant obstacles to adoption.

However, we saw that there was a great opportunity in addressing the 12 million overseas Filipinos all over the world who were already sending billions back to the Philippines to analog channels. Hence, we decided to focus on providing commerce and payment solutions to migrants using digital technologies.

We also saw that successful digital commerce companies had to have a payment component  – “you can’t buy if you can’t pay”. Alibaba had to build AliPay. eBay had to acquire PayPal. Hence, we decided to build a stack — payments, commerce and eventually content.

Please share a brief history of Ayannah, the startup process and the road to funding?

When we started, it was the worst time to raise money due to the global financial crisis. Back then, we had to put in our own money and raise funds from angel investors. To sustain the business, we had to look at the biggest payment flow that technology can enable, and it was in the remittance space.

However, we discovered that the remittance business was very much commoditised, and margins were razor-thin due to many powerful incumbents like Western Union and the large banks. We did not want to compete directly with the incumbents and decided to partner with them instead. So we focussed on providing solutions that helped migrants support their families in their home country while also improving the business of remittance companies.

We set our sights on enabling cross-border e-commerce to give migrants other options to support their families in their home country by sending “specific purpose remittances” instead of just sending cash. We launched Sendah as the “better way to send” and focussed on becoming the preferred online cross-border e-commerce site for migrants, beginning with migrant Filipinos.

However, we observed that many of the migrants, while increasingly going online, were not transacting online and this was mainly because many of them were and still are unbanked — with no bank accounts and credit cards. For example, it is estimated that only two million of the 12 million migrant Filipinos had bank accounts or credit cards.

Thus, in October 2010, we launched Sendah Direct, our B2B payment SaaS to cater to unbanked migrants. While we initially intended to use Sendah Direct to allow overseas migrants to fund their Sendah transactions, we were delighted that many retailers in the Philippines approached us and asked to use the Sendah Direct platform to sell airtime and to process domestic remittances and payments.

Over the past three years, Sendah Direct has been adopted in over 7,000 retail outlets all over the Philippines and more retailers continue to come on board. This rapid adoption made us realise that there was even a bigger market opportunity that we could address — the US$40 billion domestic remittance market in the Philippines.

So, in 2014, we launched Sendah Remit, a parallel B2B SaaS that allows retailers to process domestic remittances and payments. Sendah Remit is an emerging market version of Singapore’s NETS or EZ-Link cashless payment systems.

Our funding story, as mentioned, started with raising money from friends, family, and angel investors in 2008-2009. Our first institutional investors were Wavemaker Partners (formerly Siemer Ventures) and Golden Gate Ventures in 2013, followed by IMJ Investment Partners, Beenos, and GREE Ventures in 2014.

We met GREE Ventures in Singapore and we saw that there was an alignment in our goals. We especially liked GREE Ventures’ focus on backing startups and entrepreneurs who use technology to help solve big social problems. GREE Ventures was very interested in Sendah Direct and Sendah Remit. They saw that we had extensive local experience, and that we are solving a big social problem in the Philippines, which is providing financial inclusion to the vast majority of Filipinos who remain unbanked.

We also were impressed by the members of the GREE Ventures team, particularly, Kuan Hsu who heads GREE Ventures’ Singapore office. e brought a lot of experience and expertise in venture capital and private equity and industry experience in financial services from his previous stints at McKinsey, Goldman Sachs and Temasek. We also benefitted from the support of Albert Shyy, who had had startup experience building and growing his own online business and helping build Rocket Internet’s business in Southeast Asia.

What were the biggest challenges you faced?

The biggest challenges we faced back when we were starting up were finding the right talent, technologies and capital in the Philippines to build our platform. Instead of a cloud-hosted system like what we have now, we had to host the first version of our service in a server in California, half a world away. Likewise, there were not enough Filipino developers who had practical experience in developing scalable, secure, and reliable enterprise-grade web-based platforms. Lastly, there was no technology venture capital available in the Philippines. We had to raise funds in Silicon Valley and Singapore.

Fortunately, the technology startup ecosystem is growing rapidly in Southeast Asia and in the Philippines — so the tools, the talent and the capital are now more available. Also, our platform is pretty much built — we have a very unique platform that allows us to monetise over the web, over the phone (through carrier billing) and over the counter (through our partner merchants).

Our main focus now is execution and our priority is growing our customer base — increasing acquisition and usage while continuing to build our network of partner merchants and financial institutions. Customer acquisition is always challenging. Rapid changes in technology and user behaviour means that digital and offline marketing techniques to increase customer acquisition and usage that worked as recently as a year ago are no longer effective now. The key to success is to adapt and constantly change the way we are doing things.

What do you predict in the world of digital commerce and payments for emerging economies?

I foresee three major developments in the digital commerce and payment space in the Philippines and other emerging economies. The first trend I see is that offline-to-online payments will continue to grow, as majority of Filipinos are still underbanked. Offline-to-online payments will be key to increasing adoption of digital commerce in the Philippines and in other emerging markets.

The second development is that technologies and solutions that enable electronic micropayments will become even more important. An emerging economy is primarily cash-based, and there is a great need and opportunity for electronic payments to replace cash for micropayments. Technologies such as Near Field Communications (NFC) are already mature and already widely adopted in developed markets. We see an increasing adoption of such technologies in emerging markets especially for high volume, high velocity micropayments such as tolls and public transit fares.

Lastly, brick-and-mortar retailers will increasingly use digital technologies to increase customer acquisition, usage and loyalty. As the economy grows and more businesses are set up, retailers will face increase competition as well as increased costs (retail space will become more expensive) and will need new competitive advantages that digital technologies can/will provide.

Do you have any advice for budding startup entrepreneurs?

Firstly, do a sanity check before starting up. Not all startups generate revenues and positive cashflow quickly. Not all startups are sold or have an exit quickly. Are you willing to dedicate six to seven years of your career in setting up your company? Do you have the financial means to weather the lean months or years?

Next, look for a problem worth solving. This problem should have a market segment large enough to generate meaningful revenues — “get big or go home”. Or if you can’t go for a big opportunity, look for niche markets and offer products and services that you are passionate about. Just make sure that the niche you are serving has enough customers who are willing and able to pay to make it worth your time and effort and also to make it attractive enough to attract venture capital.

Lastly, surround yourself with people who share your views and also with skills that compliment yours. For instance, if you’re good at marketing, look for someone who’s technically inclined. This eliminates blind spots and creates a well-balanced, versatile team.

What is your vision for Ayannah in the future?

My vision for Ayannah is for us to become the largest digital commerce and payment network in the Philippines. Moving ahead, we want to move beyond the Philippines and be the leading provider of digital commerce and payment solutions for migrants and the unbanked in Asia and the world. The good news is that we are already more than halfway there — the vision is already becoming a reality.

This article was produced in collaboration with GREE Ventures. GREE Ventures was initially founded as the investment arm of Japanese mobile and e-commerce giant GREE Inc, and has invested in startups like Ayannah and YOYO Holdings. Find out more about them here.

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