Tonik raises $21 million to launch digital bank in the Philippines

A wave of digital banks, or neo-banks, has flourished in recent years in Western nations as people begin to flee megabanks.

While most of these startups are yet to prove they can turn a profit, entrepreneurs are beginning to replicate similar ideas in South Asian markets, where most people don’t have accounts with traditional banks at all. And for now, venture capitalists are backing this attempt.

Tonik Financial, a two-year-old startup in the Philippines, said on Monday it has raised $21 million in a new financing round to launch its digital bank aimed at the Southeast Asian market by September this year.

Sequoia Capital India and Point72 Ventures led Tonik’s Series A round, while existing investors Insignia and Credence participated in it, the startup said, which has raised $27 million to date.

Tonik, which recently received the license to operate a digital bank in the Philippines, said it will commercially launch the digital bank in the third quarter of this year.

Greg Krasnov, the founder and chief executive of Tonik, said according to his estimates, the retail savings market in the Philippines is worth $140 billion and the Southeast Asian nation also presents a $100 billion opportunity in unsecured consumer lending. TechCrunch could not independently corroborate these market estimations.

Krasnov, who has previously incubated four financial services startups in Asia, said the coronavirus pandemic has prompted people to double down on their savings and has made it apparent that the vast majority of people in the Philippines need access to a digital bank.

“In the Philippines, where over 70% of the population remains unbanked, we are observing a rapid jump in consumer demand for digital banking and digital transfers since the start of the year,” he said.

“We are preparing to bring a highly differentiated experience to the Filipino consumer to address these needs and are honored to be supported in this by the regulators who have encouraged innovation and welcomed technology solutions to bolster financial inclusion,” he added.

In several South Asian markets, where, like the Philippines, much of the population remains unbanked, startups are racing to fill the void. But interestingly, most of them are serving startups and other small and medium businesses — and not individuals.

In India, for instance, Bangalore-based NiYo Solutions and Open are two of the heavily-backed startups that have amassed over a million businesses on their platforms.

RazorPay, another Bangalore-based startup, last year launched a range of features, such as corporate credit cards, and a single dashboard to help businesses manage transactions and provided them with the ability to automate recurring payouts. Some of these features are currently not offered by a traditional bank.