m-Commerce in the Philippines: The way to go

by Ka Edong on July 26, 2006

I spoke to an American development finance consultant last April – Mark Pickens from The Consultative Group to Assist the Poor (CGAP). In that conversation, I told him that until now, there is still no viable and compelling business model for G-Cash and Smart Money merchants. That is one reason for the slow uptake of G-Cash and Smart Money.

So he asked me what I had in mind as the way to go for G-Cash and Smart Money. 

I shared a handful of ideas. But this was the centerpiece:

a.)   G-Cash is not gaining popularity because there are limited ways to convert cash to G-Cash (cash-in).
b.)   Compare this to the ubiquity of AutoloadMax which you can get in any corner of the Philippines.
c.)    Why not use the AutoloadMax distribution model to increase access to G-Cash? How? I’ll show you how.
 

What is the AutoloadMax model?

An AutoloadMax dealer buys P1,000 worth of load wholesale. He sells it retail in small amounts of P30-P100 or so. After he has received payment of P1,000 in total from all his buyers, he still has a remaining P140 of load. This remainder of load is system generated. The dealer just needs to sell the P140 remaining load to make his mark up of P140 (or 14%).

Globe (and Smart) are able to do this because load is (theoretically) a product that the telcos can produce infinitely (thus all the “unlimited text” promos).

How to use the AutoloadMax model for G-Cash?
a.)   A G-Cash dealer buys P1,000 worth of G-Cash wholesale. He sells the G-Cash retail in small amounts of P30-P100 or so. After he has received payment of P1,000 in total from all his buyers, he still has a remaining P140 of load (not G-Cash). This remainder of load is system generated. The G-Cash dealer just needs to sell the P140 load to make his mark-up of P140 (or 14%).
b.)   Sound familiar? Of course! It’s almost exactly the same model as AutoloadMax. And this time, the product being purchased is G-Cash instead of cellphone load. 

What’s the effect?
a.)   All AutoloadMax dealers in the Philippines will be G-Cash dealers
b.)   If I want to buy G-Cash (cash-in), I walk to the sari-sari store nearby and buy G-Cash (at cost i.e. P100 cash in exchange for P100 G-Cash).
c.)    I can then send this P100 G-Cash to, say, my friend Garpong in Cuyo, Palawan.
d.)   Garpong can go to any AutoloadMax dealer (now also a G-Cash dealer), for example Ronald. Garpong sells the P100 G-Cash to Ronald. Ronald, the AutoloadMax dealer, willingly buys Garpong’s G-Cash. Garpong now has P100 cash. — I have effectively “paid” or “sent” or “remitted” P100 to Garpong.
e.)   Ronald, on the other hand, bought G-Cash at cost. What’s in it for him? He can sell the P100 of G-Cash to another customer. And Ronald will have P14 worth of AutoloadMax cellphone load to sell (generated for him by the Autoloadmax system).

What’s the effect?

  • Thousands (as many as 800,000) of G-Cash cash-in and cash-out outlets
  • Ubiquity of G-Cash
  • Dealers making a (potential)-profit by receiving a system generated 14% load each time the dealer *sells* G-Cash. (The dealer does not make a profit yet by buying G-Cash, he makes a profit when he sells the 14% load generated by the system).
  • Velocity of payments is increased a hundred fold! It can take just 2 minutes to send money from Batanes to Tawi-Tawi.
  • And when velocity of payment increases, the economy becomes more productive, moving goods and services at a faster pace.

Migs, Nox, Angelo, Markku, Eloy, anybody …. talk to me, tell me you understand. 😉 Challenge the ideas, tell me what you think.

ka edong
em-konomist

Comments

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  • I think you got the “why not” reason in the “infinitely” part. Unlike load, which is currency that Globe can “print” as much as they want (without inflation), they cannot do that with G-Cash which is backed by the Philippine Peso.

  • hey migs!

    You\’re right, Globe won\’t \”print\” G-Cash because it is backed by the Peso.

    The key is Globe can \”print\” the incentive of the G-Cash dealer — the 14% load generated when G-Cash is sold by a dealer.

    From above article:  

    How to use the AutoloadMax model for G-Cash?
    a.)   A G-Cash dealer buys P1,000 worth of G-Cash wholesale. He sells the G-Cash retail in small amounts of P30-P100 or so. After he has received payment of P1,000 in total from all his buyers, he still has a remaining P140 of load (not G-Cash). This remainder of load is system generated. The G-Cash dealer just needs to sell the P140 load to make his mark-up of P140 (or 14%).

  • Pingback: Technobiography » The way to go: Why they haven’t gone that way()

  • there’s really nothing in it for Globe. what you’re proposing is for Globe to give out 140 pesos worth of load for every P1,000 transaction in return for what? nothing. paano na yung cost ng sending and receiving of SMS while doing all this?

    tama ba intindi ko?

  • Hi emman,

    Users need cellphone load to use G-Cash.

    By increasing usage of G-Cash, Globe increase their SMS revenue from G-Cash transactions.

    I posted this on rebelpixel last year:

    The business model I’ve seen Globe doing is that they’re earning through:
    1.) SMS messages sent for G-Cash transactions
    2.) service charges (which I believe is small compared to number 1 above).
    3.) (theoretical) revenues from partner merchant fees

    This is still accurate as far as I know.

    Note that G-Cash transactions go through an access code (2882) and is not included in any of the “unlimited text” promos.

  • i see. so they’re supposed to still earn some from the G-Cash transactions alone. baka nga hindi financially rewarding kung susundin yung ‘14% equivalent load’ model mo. malay mo they’re looking into this now. sana.

  • Re: Financially rewarding…

    The thing is, the 14% load doesn’t cost Globe a thing. (They can afford to provide unlimited text nga, ‘di ba?)

    Financially, for Globe to give away 14% is something valuable for a G-Cash retailer, but costs almost nothing for Globe.

  • justpassingby

    the cost of globe providing the technology, systems, etc. for this proposed “tingi” of gcash is too high while having essentially zero direct revenues. its not the same as selling load through autoload max because the P25 load they sell is also a P25 direct revenue. sa gcash, a P25 sale in gcash would yield them a P2.50 revenue (from texting?).

  • I get what you mean. Really.

    I’m looking at it from the G-cash company’s revenue stream. Their revenue stream is from texting when users transact G-Cash.

    So how do you increase that revenue stream? By conducting more transactions? Increase transactions by making G-Cash as accessible and as ubiquitous as cellphone load.

  • Pingback: Get 15% rebate from G-Cash | Technobiography()

  • Ruben

    What if you, Garpong and Ronald is one and the same person. Meaning, I will buy G-Cash from my 1st SIM (so I will get 14%) then send it to my other SIM, and then sell the G-Cash to my 3rd SIM (and then get another 14% profit). Imagine if I do that thousand times. Is the process vulnerable to fraud like “arbitrage”?
    Thanks.

  • Ruben

    Another story of Arbitrage…do you remember when Globe and Smart were offering free SIM replacements and free Jollibee for new prepaid SIM subscription? Well here’s a story of a friend who did this before… He will buy a SMART SIM for P100 with P20 or P30 pre-loaded top-up, sign up and get the free chicken at Jollibee. After using the pre-loaded top-up, he then get to Globe shop to get a free SIM replacement. Then sell Globe SIM which has a higher retail value of P150. This is one of the reason why there’s so many shops wanting to buy used SIMs before (I think this was in 2003-2005). Thanks

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