Remittance fees seen as profit driver as Philippines’ Gcash aim for IPO

Globe Telecom’s e-wallet unit is said to be eyeing an IPO in the next two years.

Gcash, the e-wallet unit of Philippines’ Globe Telecom, is likely to become more aggressive in monetising some of its core services prior to public listing, although any additional or increase in fees will test the loyalty of its Filipino users, Fitch Solutions said in a note.

While Gcash dominates the country’s digital payment market currently, it said the firm is facing a “challenging endeavour” to boost profitability and increase its shareholder value prior to its reported plan of an initial public offering (IPO) around 2024 to 2025. 

Monetising core businesses was a popular growth driver for e-wallets that went public in the past but Fitch cautioned of the risks, noting how PayPal, which lPO’d in 2002, struggled to generate shareholder value while keeping fees on services low.

Testing reactions to potential price hikes will be key prior to the IPO although the company is still expected to be supported by a homogenous customer base and its reputation as the leading e-wallet platform. 

Meanwhile, Fitch sees an opportunity for Gcash to impose fees on its remittance services around 0.2% to 2% and capture a large pool of overseas Filipino worker customers who send money to their families back home on a regular basis.

“GCash's remittance service comes at no cost, and in our view this makes the e-wallet highly appealing to existing and new customers overseas. Expansion plans overseas will be greatly facilitated from the latter offering,” it said.

Fitch expects the e-wallet to rapidly build a customer base in its targeted markets in the US and the Middle East and Northern Africa region.

It said the US alone accounted for 41% of all the remittances that entered the Philippines in May, which presents “great organic growth and profitability opportunities.”