Asia Tech Podcast – Episode 109 – Mikko Perez – Founder, Chairman, and CEO at Ayannah – It’s Almost Like an Evolution

The Asia Tech Podcast had a superior conversation (a bit of a catch-up) with Miguel (Mikko) Perez, the Founder, Chairman, and CEO of Ayannah. “Ayannah is a leading provider of digital financial services to the world’s emerging middle class, most of whom are migrants or unbanked coming from the base of the pyramid.”  Not only is Mikko deeply insightful about the state of FinTech in the Philippines and the rest of the region, but he also cares deeply about Ayannah’s clients that use its payments, commerce, and analytics tools.

Mikko and I covered a wide range of topics as we caught up from our previous recording back in May 2019. 

In this episode we discussed:

• The impact of COVID on the growth and business of Ayannah
• The role remittances play in the life of people in the Philippines countryside
• How payments facilitate not just e-commerce but offline commerce as well
• Ayannah’s business grew by 8X from 2019 to 2020
• The impact of Android devices getting into the hands of millions of people in Southeast Asia
• Contingency planning and remote working…some employees slept in the office
• How the Ayannah network actually functions
• Payments to InsurTech to Lending

Please find the full transcript below:

Michael Waitze 0:00
Okay, let’s go. Hi, this is Michael Waitze, and welcome back to the Asia Tech Podcast. Today I’m joined by the esteemed Mikko Perez, the Founder, Chairman and the CEO of Ayannah. Welcome back to the show. How are you doing?

Mikko Perez 0:17
Hi Khun Michael, I’m doing very well. Thank you for having me back. It’s been a while. Yeah, I think it’s been almost two years.

Michael Waitze 0:25
I liked the little Thai reference, actually, with the Khun Michael.

Mikko Perez 0:28
Yeah. And I understand you’re still in Bangkok, safely, sort of ensconced there having beers and getting a lot of vitamin D. I imagine.

Michael Waitze 0:39
It’s actually I hadn’t thought about it. But you know, I spent 22 years in Tokyo, and now it’s almost 10 years in Bangkok. So I’m almost halfway there.

Mikko Perez 0:47
Well, it’s great. It is. Yeah.

Michael Waitze 0:50
And you’re right, the last time you were on the show, it was actually May 2019, I had to go back and check. And, you know, I was thinking kind of ironically, that since then nothing’s changed.

Mikko Perez 1:01
Well, you can say that they think in some ways, nothing has changed. We’re still at it. They’re still doing what we’re doing. Since, you know, since we last talked, but in many ways to everything has changed. The world has changed. And, but and you know, in, in many ways, it’s been kind of a, it’s been a bad change, meaning things are not really looking good for a lot of people, but but there was a silver lining for us. I mean, our business has done extremely well. Like, probably, you know, I mean, many of these FinTech companies have been busy. And, and that includes us. It’s been crazy. So from 2019 to 2020, I think our business grew by eight X. And we haven’t done we haven’t done any marketing.

Michael Waitze 1:51
What do you think drove that? In other words, you know, the FinTech space was, it was always going to be big, right? Because there were a lot of things to change inside of sort of the financial services world using technology, hence the term FinTech. But if I’d asked you a year and a half ago, or 18 months ago, when we last spoke, would you be growing by eight times if we talk again, in 2021? I think you would have said probably not. Like, what do you think drove that?

Mikko Perez 2:16
Well, lots of things. I mean, I think it’s been, there’s been a slow sort of adoption. Number one, I think, is basically the Android handset, right? The Android phone I mean, basically, it puts the internet in the hands of hundreds of millions of people more than the iPhone, obviously, because it’s cheaper. Everyone, everyone has one, right. And so that’s one number two, so of course, the mobile devices. And, and then, you know, in Southeast Asia, it’s been not as adoption for digital has not been as fast as let’s say, China, and, and other maybe some of the developed countries. But even then, because of all the problems of a broken sort of physical payment infrastructure. There was really the impetus for people to go digital and that impetus actually just got stronger because of COVID. Because, you know, it’s not surprising that are that spike in transactions happened, right when our government in the Philippines declared that a lockdown in March 2020. And it’s because people are afraid to go out and do things over the counter face to face, right. So basically, people were basically scrambling to start doing digital transactions across the board, you know, mobile wallets, all of a sudden, they got a spike in adoption. And then in the remittance and payment space where we play in, obviously, we kind of rose with that sort of that, or, you know, with that type of digital adoption. So I mean, to paraphrase Satya Nadella, he said that they saw Microsoft saw two years worth of digital transformation in a matter of two months. I would say probably, it’s almost March. So I would say we’ve had like, maybe 11 years of digital adoption in a matter of 11 months. So it’s been crazy. And, and, you know, I mean, sad to say, I mean, we didn’t want to, you know, we didn’t want to benefit from a tragedy, obviously, this pandemic is a global tragedy, but, uh, but, you know, I mean, there was a silver lining. I mean, I guess we were sort of in the right place at the right time. And we were there to sort of, sort of serve the needs of a lot of people. So specifically, what happened was, you know, I mean, I say, I think I mentioned with the last time we chatted was, we were playing in the domestic remittance space in the Philippines, where, I would say between 20 million people send another 40 million people, you know, 20 million living in the cities, sending 40 million people in the countryside, what they call domestic cash transfers. And, you know, that happens, they feed the 5 million times a day. And that was done all over the counter. I mean, just before the pandemic, and obviously, because of the lockdown the quarantine, no one could, you know, you know, no one could actually walk over to a remittance center and send money anymore. So people scrambled to start doing things digitally, particularly on the sending side, you know, where, you know, in the urban area, or even from overseas, people had access to apps, right, or mobile apps, or they had access to bank accounts. But by and large, a lot of the recipients in the countryside are still cash-based. So I would say 80 to 90% of the remittances are still claimed in cash. So what you’ve seen is sort of a phenomenon of the sending side, becoming increasingly digital as more people scramble to go digital, for public health reasons. And, you know, and all that and convenience, but at the same time, the countryside is still lagging, meaning, you know, until internet infrastructure and, and payment acceptance in the countryside, become more digital than, then obviously, people still want to pay cash. So that’s probably going to happen over time. But you know, it will take time and even our monetary authorities saying that it that that that particular transaction flow is probably the slowest to get fully digitized, because obviously, of the infrastructure constraints in the countryside.

Michael Waitze 6:43
So that was two questions. I want to ask you actually if you don’t mind. Sure. If the senders are sort of digitally enabled, right, they have a mobile phone, most likely Android, like you said, because it’s not expensive, and it’s got mass adoption. And they send something digitally. How does it work, sort of infrastructure-wise for the receiving party to get it in cash? In other words, where does that money go and where do they pick up that cash? Do they pick it up at a bank? Do they pick it up at sort of a physical distribution center that’s in a small town somewhere. How does that work?

Mikko Perez 7:12
Yeah, so so what we did was we built a software as a service, we call it software service is basically, based in the cloud, we also have an app, it’s called Sendah Direct, we have two apps, one called Sendah Direct , one called Sendah Remit, they’re pretty much the same, except that because of monetary authority regulations, there’s certain caps that we can do certain types of transactions that, so I mean, basically, it’s the same thing, but it’s just to have like, Microsoft Office, Home Edition and Microsoft Office Enterprise Edition, you know, I mean, so yeah, so that’s what we have. And so what we do is we connect banks, and other remittance centers, or even sort of mobile wallets, using this platform to a network of agents, we call them agents that are in the countryside. And these are these could be individuals that could be, you know, an employee of a gas station chain, or, or a remittance chain, like a you know, remittance partner. And so all they got to do is download the app, and they’re part of our system. So all of a sudden, we got this network. It’s like creating like a human ATM network. Got it overnight. And so so what happens is someone sends money and it’s processed through our system, we generate what we call a reference number. And that reference number is sent to the mobile phone if the recipient, then goes to any of our agents in the countryside shows the reference number, it’s like an alpha numeric code. And then the system the agent has cash in its till. Normally it’s someone who’s a retailer like a little like a rice, like a rice store or whatever. Like in the Philippines, we call them sari sari, but in Indonesia they’re also called the warung or in India, they’re called kirana. I don’t know what they call them in Thailand. But but so normally is some guy with a store we were with some kind of retail presence. And so the recipient goes there and shows the code and then and gets the cash so the cash doesn’t come from a bank account, but it comes from the the till or the cash register or the cash box of the of the agent. So the agent normally will have another business which is basically selling fast moving consumer goods, you know, Unilever, Procter and Gamble, you know, noodles, rice, cooking oil, sugar, and so they receive their, the money in cash normally from their customers. So now they have cash in their till. So if someone comes in and wants to do that, to claim a remittance, they have cash to pay that out. So that’s how our system works and, and because of the pandemic, yeah, a lot of these little mom and pop shops are to download their app and join the our wonderful network partner. So we actually technically do not even manage any of these networks, we just provide the app. And that’s why I call it Microsoft Office is because it’s really just software. So I mean, it could be like a chain of gas stations, or it could be just one guy who wants to get into this business, because he has a little store in a little village, and he wants to become one of our agents, he can just download their app, or it could he could be an employee of a bank or a rural bank, in most cases. So. So it’s interesting, it’s like almost like Grab for financial services. We use human agents in a way, the same way Grab will use driver to deliver goods, or do to pick up people and bring them somewhere.

Michael Waitze 10:54
Yeah, this requires a huge amount, this requires a huge amount of trust, though, for that person managing that cash, is that right?

Mikko Perez 11:03
Well, no, because everything’s wallet-based. So we don’t really extend any credit to anybody, nor do and nor does, nor do anybody extend credit to us. So everything’s kind of based on some kind of real-time funds transfer between, you know, one sending wallet or receiving wallet, and, and we do all these reconciliations electronically in real-time. So in a way, it’s actually pretty, I mean, the fraud levels are very low. And, and, yeah, so it’s not like we’re okay. So, you know, I mean, for example, I’m the guy with a little store in the countryside, right? And someone comes to me and says, Hey, I got this remittance reference number, can you give me you know, the equivalent of maybe 1000 baht, or 1500 pesos? So, so they, they claim it. So technically speaking, the agent is out of pocket, right? He acts, he actually has to pay out in cash. But what we do, we actually already transfer in real-time, as soon as the transaction is, is, is approved, or we if we honor the transaction, we already transfer in real-time, the funds, including the associated fees, to the agent’s electronic account that we manage to our software. So he knows that the money’s there, it’s just that it’s in electronic form. So actually, in a way, it’s actually quite a brilliant system. Because

Michael Waitze 12:38
Because of this actually, right, because we have all these little, you have all these little points around whether it’s in a village or a small town or even a second or third-tier city, people who is I presume they make a little bit of a commission or get some kind of payment if they do this, No?

Mikko Perez 12:53
Yeah, they do. So okay, so let’s say I have a little store, or maybe a gas station is probably a better analogy. And every day, you know, maybe I could get around maybe 2,000 to 3,000 US dollars equivalent in terms of my revenue from selling petrol or whatever, right? Yeah. So I have about $2,000 to $3,000 worth of money in my cash register, which is obviously something that I’ll have to either bring to the bank. So I can deposit to my account, or I can have an armored car, pick it up, which is some some some of these big chains to do that. So in a way, by becoming a cash-out agent, they don’t need to pay the bank or, or go through the trouble of being the cash physically back to the to deposit into their bank account. By dispensing it, the sort of remittance, they make a bit of money. Plus, we actually credit their account in their bank account already. The amount, so it’s like it, we actually minimize the cost of handling cash for them. So so so far, we’ve had, like, you know, it’s been, it’s been crazy to say this pandemic, like one of our networks grew from 200 agents in January to over 2,200 agents by December. And, and, you know, I mean, it kind of shows that it’s a service that people needed, even before the pandemic and even much more during the pandemic. And I think even after the pandemic is contained, people realize, Hey, this is a better way to do things. So we’ll just might as well keep doing this, right?

Michael Waitze 14:33
This is not going backward. I’ve got a another quick question for you. Sure. You know, when you’re running your own business, right, and you’re trying to grow things, whether you’re marketing or not marketing, and you said you weren’t actually, you know, you still come into my air quotes around you come to the office every day and you’re kind of monitoring and trying to figure out how to grow and the pandemic hits. I don’t know exactly when in the Philippines that impacted you in Bangkok. He was I literally think like March 15, or March 18. Right? Everything changed. Could you see it? Could you feel it? You know what I mean, with your staff and your developers? And just watching the network and thinking, Oh, my gosh, this could really accelerate. You know what I mean? Do you remember that feeling?

Mikko Perez 15:13
Well, well, actually, the feeling was very different than the beginning of it. Yeah. Well, we were actually thought it was like, the end of the world for us.

Michael Waitze 15:21
That’s what I was gonna say.

Mikko Perez 15:22
Yeah, I mean, and then so we never expected the spike, to be honest. I mean, I mean, I mean, intellectually, we knew that, okay, this could accelerate things, right. But, but when you’re right in the middle of the pandemic, and you hear all these pronouncements, people like getting sick and dying, and the government say, we’re going to lock down the economy, and no one can leave their homes. So the first thing that actually, we started thinking about because we had, we started having business continuity meetings in February, because, you know, we were getting the news from China from Wuhan. And, and so you know, internally, we’re saying, Hey, we got to prepare for this. We don’t know what’s going to happen. But it seems like it’s really gonna be, Oh, my gosh, it’s like a, like, a black swan event. Right. So So we’ve been meeting and so we’re saying, so we started doing what are our contingency? Right? So, you know, one thing, one of the things is if let’s say there was a total lockdown, which is what happened? How do people go to work, right? Because at that time, and up to now, maybe we have around, you know, we our headcount is like 65. And, and at that time, most of them would still go to the office and, you know, sort of endured horrendous traffic of money left to get to work from their homes. Right. But so it’s ended. So we said, okay, now, if they can’t leave their homes, what happens? So we basically had to prepare everyone, the developers had to bring their machines back home, some of the developers who did not have internet in their homes, had to, we had to actually pay for their internet connectivity, so they can be productive. So in a matter of few weeks, we basically went from, you know, most everyone working in the office, to everyone working remotely, except for a handful of our staff that still go to the office, because, like, someone like a sys admin to us tech support, because we still do have some servers in the office. And, and, and our customer service, we, we actually insisted that they stay in the office because our business is 24 by 7. And, and so at that time, if the customer service people were to go home every day.

Mikko Perez 17:41
You know, it’s just dangerous, because, you know, if they didn’t have public transit, right, you would have I mean, yeah, so so we ended up what we did was we got one of our we, we basically ended up having like a shuttle driver, one of our we hired someone to basically bring people to and from their homes to the office. And we the customer service reps in the sys ads, agreed to sleep in the office for a week. So they only go home once a week. And, you know, we, of course, we took care of their food and everything. Yeah, so and we also reassured them if they got sick with take care of them. So it was really, yeah, I mean, it was a crisis, but and then, and then for the first week, it’s really scary, because we didn’t, the banks are actually closed. Because even though we’re doing everything on our wallet, on our apps, we still need settlements through the banks, right? Because at the end of the day, when we have partners, we still transact with them through normal bank accounts. Right? So for a week, all the banks are closed, and, you know, so nothing happened. So we saw our transaction volume drop precipitously. And then all of a sudden, a week later, when finally the banks opened again, and we were having debates, are we going to open again or and then? And then are we going to make people stay the office, but then all of a sudden, it started spiking. And the reason was, a lot of people were still being paid. A lot of people who are getting paid their salary in the Manila in the urban areas. They would, you know, physically, you know, go to the elevator from their office, once they, once they know that their funds hit their ATM account, they would run out of the office, go to the nearest ATM, withdraw the cash and then walk to the nearest remittance branch or remittance agent and send the money. And that’s impossible now. So all of a sudden, they had to go online. So we created a version of our app that was really meant for people who wanted to do things online. But the recipient still wanted to pick up things in cash. So it was called Sendah Quick Remit, which actually, in a way, was the reason why our volumes grew. And in fact, we’re now creating the new versions of that because all the banks wanted to connect to that as well. I love it. Yeah. So it’s, it does really well, it’s a it’s a happy sort of it’s like a happy story in the midst of the gloom and doom right then. So we’re just, we feel fortunate that, uh, that we kind of were, you know, it kind of we kind of, you know, we weren’t heavily scarred by this whole pandemic.

Michael Waitze 20:27
But there’s a, there’s a theme here, right, and a trend as well, a lot of sort of the InsurTech companies in FinTech companies have said that they feel like the digital transformation that they were expecting to happen, was accelerated in a way that they could not have anticipated. And that kind of sounds like what’s happened to you? Is that fair?

Mikko Perez 20:45
Absolutely. So basically, it’s just the timescale just compressed for us completely. Yeah, from two years to two months. And I think that happened globally. And, and in a way, we’re happy that we really decided from the very from the get go, that we want it to be just purely app based, that we have no physical presence, no brick and mortar, because if you had then obviously, would be a little more, our business continuity would have been more effective. But so by, you know, in a way by well, partly because of necessity, because, you know, we didn’t have the money to roll out any physical brick and mortar anyway. So we kind of we kind of, we kind of avoided having to, to close down shops, because we didn’t have any shops in the first place. Yeah. So yeah, absolutely. I think across the planet, it’s been that way, right. And Amazon stock is like crazy, right? Because Amazon is probably one of the biggest beneficiaries of this whole thing.

Michael Waitze 21:45
Well, and logistics companies as well, have you seen? Or what do you think is going to happen to accelerate the other side of this? In other words, sure, the senders and the senders, right in big cities like Manila, now, instead of going to the bank, and then going to a cash remittance center will now use your services. But on the other side, on the recipient side, you need some more cash. Do you I guess it’s really kind of two questions for me. What do you see accelerating the recipients as well, going digital since they still have the phone? Right? In other words, they must get some kind of notification that says a remittance has been made. And second, is that is that desirable or not? Really?

Mikko Perez 22:23
Well, I’ll answer the second question first. Yeah, I think eventually, that that makes sense for everybody, right? I mean, just reduces costs of transactions and everything. I mean, yeah, friction, and cash is actually a very expensive mode of payment. Yes. So I think in theoretically, to go to a cashless society is actually beneficial to everyone, particularly to the tax authority. Right. So, but, but of course, there are, I would say, constraints or impediments to that? Because number one, and again, this answers, the first question is, I think for that to happen. Number one, incomes have to increase because what we’ve noticed is that there’s I think there’s willingness to try out these more frictionless or more efficient ways of, of paying for things or accessing financial services. But unless incomes go up, I mean, people are really living hand to mouth. So the average domestic remittance in the Philippines is 30 US dollars. Got it. And then sometimes we will see transactions of even $15. And we asked Why? Well, because the the recipient needs money to buy medicine, urgently. And, and so the sender, and many of them are blue collar workers working in the, you know, in Manila, us, you know, domestic helpers, or construction workers. And so they’re sending money basically, just to meet the next day’s groceries or just, yeah, so. So that’s one. I think incomes have to increase, which I think this kind of goes back to our more the broader macro theme we were talking about in May 2019, about unfettered capitalism, and neoliberalism and you know, all that stuff. But But yeah, so that’s one. I think, number two, is that because of that, a lot of the, you know, the sari saris or the warungs, they don’t really want to have, I mean, they don’t mind accepting digital payments, but it’s not like their biggest priority. Because, right, you know, I mean, for them, yeah, I mean, and so, for, for for the economy to become more digital, I think you’ll need to have merchant acceptance, meaning these little guys and these little guys add up right meaning, I would say that for the FMCG products, you know, your rice so you know, instant noodles and canned sardines. The estimate is still between 60 to 80% of fast moving consumer goods are still sold through this what we call the traditional or informal trade rather than the modern trade. Right. And those guys are I mean, so I would say the bulk of the retail economy is still through this informal or, or traditional trade. And for them, you know, for as long as people still pay them in cash, they will, they will still accept cash. Now, if someone were I mean, like the biggest drugstore chain in the country actually doesn’t even bother having a credit card terminal in their branches, because everyone’s paying in cash. Right. So it’s a it’s a, I think it’s gonna be a long, it will take time. So maybe now right now, it’s 95% cash, maybe in the next two years, it will go down to 80% cash. Or maybe I think it will go down maybe to 60%. Cash, but like even countries like Japan is still very much a cash economy. You’ll be surprised. Well, you lived there. You probably know that. Yeah. So so if you’re in Tokyo or in Ginza, or, or in Shinjuku, then obviously you can with Pasmo or whatever. Yeah, but it’s still cash. Yeah, yeah. So So I think, unlike in China, I guess because of the basically, the Communist Party dictates that everyone uses cash. wallets, right. electronic money. Right. But I mean, Philippines is a democracy. It’s a bit of rambunctious democracy. In the US the same thing, you know, they tried to demonetised, the rupee four years ago. And yes, there was a rise of usage of electronic wallets, but that kind of died down again, people are going back to cash. So I think cash will persist. Even I think in the UK, it’s still very much a cash, there’s still a lot of cash transactions. And they say that in, in times of economic down, turn, the use of cash goes up, because people don’t have access to credit or their credit cards are maxed out. So they just have to go back to just living off whatever cash they have, rather than borrowing money from the credit card company and stuff like that. Yeah.

Michael Waitze 27:15
So do you still see an international opportunity for this as well? I mean, we talked about this last time, too. There are a lot of overseas workers that send money back to the Philippines, has that business kind of stayed stable, has that fallen off or grown? Like what is the what is what’s happening there?

Mikko Perez 27:31
Yeah. Well, the initial sort of, sort of forecasts or the the predictions is, you know, in the second quarter of last year, we’re kind of dire, like the, you know, the World Bank, the IMF, were saying that probably globally. cross border P2P remittance was gonna drop by 15 to 20%, which is a sizable amount you talk about 700 $700 billion of person to person. remittances. Right. Yeah. So but and, and we, and we did, we did notice that there’s been a weakening, particularly from the Middle East, right, because a lot of the guests workers were sent home and, you know, oil and gas, I think it’s sunset industry. So I expect that a lot of our guests workers working in the Middle East will probably be be will be sent home in the next several years. So that’s a long term sort of trend, they think. But interestingly enough, the other thing I’ve noticed is that because the Philippines exports a lot of seafarers, whether in cargo ships or oil tankers or more so in cruise ships, a lot of the crew and the end staff are, are are Filipinos. And now if you go you look at Manila Bay. There’s like 30 giant cruise ships anchored outside. So when the pandemic Yeah, when the pandemic happened all the cruise ship operators just said, Okay, we’re gonna have to send these the this Filipino seafarers home anyway. So let’s just sail the ships there. And then just anchor in Manila. probably cheaper to anchor in Manila than in Singapore anyway. And so and so yeah. Now you see, there’s like 30, white, white elephant elephants? I was Yeah. Yeah. So I think that’s that obviously the effects are but the last, the last sort of report quarterly report from the monetary authority, is that actually it wasn’t as bad. Is it a maybe a 15% decline, it was more like a 7% decline. And actually, we saw a little bit of an uptick already in the fourth quarter of last year. So I think, you know, there’s certain segments that are kind of still working, you know, I mean, if you’re a nurse in the UK, most I mean, if you’re a Filipino nurse in the UK, you’ll probably keep your job Right, right. And and Same thing in the US. Yeah. So, yeah, yeah.

Michael Waitze 30:03
Do you one of the things you mentioned India, right. So I do a lot of conversations with people in India around FinTech and also InsurTech. And one of the things that’s been happening just sort of structurally is that a lot of the payment and remittance companies in India have moved into the insurance business, if that makes sense. So one of things said was, if we have all these customers, we have all this money moving around. How can we then get into the InsurTech business as well by either partnering with an underwriter or reinsurer or some other InsurTech to offer insurance products? Even if they’re microinsurance or bite-sized insurance products? Do you see that as an opportunity in the Philippines as well for you?

Mikko Perez 30:41
Absolutely. So that’s why we’re I mean, I think, you know, you know, being in the remittance and payments, business is sort of, sort of the it’s, it’s actually a very, it’s, you know, the margins are thin, you need volume to make real money. But it’s your it’s, unless you’re in the remittance and payment business, you’re kind of you’re not in the game, right?

Michael Waitze 31:05
No, you’re left out of the digital economy in a way.

Mikko Perez 31:07
Yeah, exactly. So that’s why if you look at all these big unicorns, a lot of them are started on a wallet, so BPM started out, you know, but actually BPM started out, selling, recharge, like what we did, and then they transform themselves into a wallet. So a lot of that. So basically, what the idea is, you got to get into the flow, or you got to get into the payment, the wallet of the customer, so you get access to the data, that you need that data to number one, you need access to their wallet, so they can pay you, right, you’re an insurer, right? Or also, you need access to the data, so you can underwrite better. So it’s not just insurance, but also a lending. So and also now I think the other thing that’s happening in probably the sort of the late last stage of this transformation is rebuild wealth management. So you can so I think what’s gonna happen is, you know, from you know, first of all you facilitate remittance and payments, then then, then oh, now you have access to their data, oh, this guy sends $500 a month, his family in Kerala, in India, from from whatever, and then this, this domestic helper in Hong Kong since $200, a month his or her family in in Philippines. So they’re okay, now you can start at least you have an idea of their cash flow, right? So then, so then a lender actually will want that data so that they can underwrite. So if you can now offer, hey, you want a cash loan, because you will notice for the past six months, you’ve been sending $500 a month to your family, it’s consistent, it’s frequent. And it’s pretty high value if I want $1. So maybe you’re, you’re, you’re eligible for a cash loan of maybe $2,000. So, so that’s one way. And then also, for an insurer, obviously, if you want to provide the insurance for somebody, you want to make sure they’re able to pay their premiums. So. So that’s also a one way of underwriting. So definitely, that’s where it’s headed. So if, if you look at it, it’s almost like an evolution. So from being, then you can borrow from borrowing, you can now protect, you know, protect yourself. And then lastly, you can also invest. So what we’re seeing is that’s the progression and hopefully, when someone goes becomes very financially secure, financially independent. That’s the progression, not the other way around. Right, right.

Michael Waitze 33:41
Yeah, we talked about this last time. The idea is not to give people access the unbanked sort of in the underserved. The idea is not to give them access so that they can get poor, it’s so that they can get richer, right? Like exactly financial services, better financial wealth management, stuff like that.

Mikko Perez 33:56
Yeah. And that’s what, yeah, that’s what we want to do. I mean, so we’re, we’re actually preparing other, we call them value added services. And we’re talking to partners in India, we’re actually talking to people also in other parts in Africa and Nigeria. So yeah, it’s all over in emerging market. It’s happening. What happened in the developed world, maybe for the past 20 years because of the internet. It’s actually happening in emerging markets, maybe, maybe it’s going to be compressed to five to seven years because of incomes and you know, Coronavirus, basically also delayed people’s wealth creation, right? Because if you’re out of work, then you can’t save, right? So, but but I would imagine there’s still a lot of upside and and I mean, if you look at the demographics across Asia, India, Philippines, Vietnam, Indonesia, these are big populations, median ages are below 30. So, so I mean, this the I think, I think the macro for the next decade is that the middle class is going to come out of Asia and…(Agree completely). So that’s why we’re, in a way, maybe for the first time in my career, you know, having sort of left Silicon Valley very early. I thought I now feel I’m at the right place at the right time.

Michael Waitze 35:17
You know, it took me 30 years to be in the right place at the right time.

Mikko Perez 35:20
Exactly. Yeah. So yeah, so, so I think that there’s a lot of upside there. And we’re actually right in the middle of it. And, and yeah, we’re looking at stuff closely, you know, things are happening at different rates. And, and each country is idiosyncratic, right? So Thailand’s different from the Philippines or India or Vietnam, so, but it’s exciting, you know, like, like, we’re we, the one thing that happened, that change, since the last time we chatted, Michael was that we finally got our Indonesian business running last year in the middle of the pandemic, and, and it’s growing very fast. (Congratulations!) so we’re excited about that. And, and, and maybe in the next few weeks, we’ll, we’ll we’ll have more good news about other parts of the region.

Michael Waitze 36:07
I want to say one more thing, and then I’ll let you go. I mean, I’ve so many things to talk about, but I don’t want to take up more of your time. What do you think about these companies like Affirm in the United States, and even hoolah in Singapore, that provide this kind of buy now pay later, but with very transparent terms, in other words, not like a credit card, where if you miss a payment, the rates get to be 25 27%, aggregious. But it’s more just like, Look, you buy this, you make four payments, if you miss a payment, we’ll help you do it. What’s your view on that? And where Ayannah kind of fits into that ecosystem?

Mikko Perez 36:42
Well, so. Okay. My view is, I think anything is better than paying 3.5% a month, right? Yeah, if you get the penalty. So for me, it’s great that there are there are companies like Affirm or hoolah, who I, by the way, I know who the founders are, and that are doing that. Because and, you know, I mean, anything’s better than, you know, what this notice what was available before. And I think that’s partly because of liquidity, right? I mean, because of all this quantitative easing, basically, there’s so much. Yeah, and so that’s good. So in a way, in a way that kind of, is helping level the playing field a little bit. Right. So. So that’s good, I don’t I so I think that’s a good thing. And I think in the end, interest rates will have to go down, because that’s more capital, more lending capital is made available, partly because of technology, right? Because of digital technology. Now, you can actually lend someone in Estonia or the US can now lend some, some guy in a village in the Philippines. $2,000. Right. And, and, and make an underwriting decision instantly and get paid. So all of that is sort of gonna compress lending rates, which is good. And to answer your question, how does AI fit in? So we’re not a lender, and in some ways, I wish we were because we see the rates now. But but so but as a company, policy, we want to be remain as an open banking platform. So we’re actually helping a lot of these lenders access the underbanked. And those with very little sort of underwriting data by giving them the underwriting data. So we’re working with big players in the payment and lending space. And they’re all trying to hit this middle class, and what they call the SME entrepreneurs in Asia, right? Because these guys, well, number one, these guys need working capital to recover from COVID. Number two, I mean, at least, if you’re, if you’re lending to a warung, or kirana, or a sari sari guy, at least you know, that the guys using it to do something productive and earn a living, right, rather than if you’re just lending cash, and then you don’t know where that money is gonna go. So, yeah, so are we remain open banking, we don’t want to be judgmental of the people still want to do salary loans or cash loans. I mean, we will still facilitate it. But our bias is towards helping SME entrepreneurs and improve their business and hopefully generate more income for themselves. And then later on, start, you know, hopefully, they will start you know, coming up with the investment account so they can actually compound their capital better and you know, yeah, okay, yeah, this, we’re right in the middle of that.

Michael Waitze 39:38
Okay, look, I’m gonna let you go. As always, this was amazing. We waited way too long. I’ll put that on me to have you back again. And maybe six months out, we can come back and see how things are going in Indonesia and maybe how other things are happening there as well. It will be great to have you, be glad to have you Mikko Perez the Founder, Chairman and the CEO of Ayannah. Another amazing conversation. I really appreciate it.

Mikko Perez 39:59
Let’s do Thank you very much for having me. And and stay safe and hopefully one day, the borders open so we can finally have our beer.

Michael Waitze 40:10
First round is on me.

Mikko Perez 40:11
All right. Thank you. Thank you, Michael. Take care.