Business Talk with Moritz Gastl, Vice President for Growth of First Circle
Moritz Gastl is the vice president for the growth of First Circle, a young FinTech company geared towards financing the business-to-business (B2B) trade transactions of small and medium enterprises (SMEs). He has been in the Philippines for seven years, having worked in an M&A firm and then in MoneyMax before joining First Circle this year.
German-born Gastl earned his degree in international business from the University of Maastricht and also did a banking stint in London, Amsterdam, and Hong Kong, before ending up in the Philippines.
Please tell us about your background and experiences.
It was very helpful working in a bank, in general, to help me understand how the Philippines works on the top level, who are the people, who are the families in the Philippines that are powerful, who owns what, what are the power dynamics. It gave me a sense of how the big corporations work.
Then in MoneyMax, I was, for the first time, solely responsible for more than a hundred people. I got to grow the business, which is incredibly helpful in understanding, “How do you manage people?” But in particular, for me being German, “How do I manage Filipinos?” Germans are very rational, very logical, while Filipinos tend to be very emotional, which was definitely a challenge for me in the beginning.
I would say both experiences were useful now for First Circle. The first banking experience was useful in that I now know how the financial industry works here. Whereas the Moneymax experience equipped me with how to start a business from scratch and motivate people.
Can you tell us more about your role in First Circle?
I am running the growth function here. The idea behind it is that I’m overseeing all the sales functions, all the marketing functions, and generally how the customer comes to First Circle. At the same time, I’m also responsible for the experience of the customer when they onboard; for instance, do they have a relationship manager assigned to them that helps them through the entire process? Should we be going to the customer and scanning the documents for them, for those that are in the old age bracket or not familiar with the platform?
I do interact and face the customers a lot. Our approach as a company is that we want to be as close to the customer as possible. Ultimately, even though I’ve been here for almost seven years, I wouldn’t dare say I understand the country or the people well, which means we need to spend as much time as possible with our customers—understanding them and what their needs are.
What are the flagship services of First Circle?
I’ll also address the common mistakes of what people think we are. Generally, people look broadly at the financing industry, where there are financing companies that address consumers—personal loans, consumer loans, etc.—and there are those that address businesses. We’re definitely in the second bucket. But within that second bucket, there’s the big distinction between collateralized loans and uncollateralized loans. Collateralized loans would be where one already owns a car, a land, or a house, and you lend against the value of that property. That’s primarily what the banks are doing here, and that’s what most people are familiar with.
Uncollateralized loans means loaning someone that doesn’t have an existing property, asset, or credit profile. Within this segment, a lot of people are mistaking us for a typical SME lender, which is also something that we’ve started off with. However, we have since pivoted into a specific niche, which is invoice and purchase order financing.
For instance, you have an SME that is up-and-coming and has a big contract, let’s say, from the government or a big corporation. They don’t actually have the financial means to fulfill that contract, but the contract is already there. If they can actually fulfill that contract, they will get the money in return. That’s where we come in and help SMEs. We fund these invoices or purchase orders for them to be able to fulfill the contract, make the money back, grow the business, and come back to us.
For me, the most fulfilling thing is that you can see businesses grow alongside First Circle. They start very, very small, and you get to know them, you get to understand what their business is, and then over time, there’s a lot more trust, and a lot more understanding.
What challenges do you foresee in this business?
The challenges are really with infrastructure. The infrastructure to underwrite the businesses needs to be a lot better because a big problem is how to find out whether the individual or business I’m lending to is actually credit-worthy. That is challenge number one in the future and parts of this need to come from the government.
Other challenges that we foresee are with the customers. Over time, we expect them to interact more digitally because we do want them to use our platform in a self-serve manner. It would be easier for those in the province to go to our platform and do everything themselves, but the reality is that not all customers are used to this.
After financing an SME, what comes next?
The reality is that the beauty of this is that we really see customers from the beginning—from a small loan to a bigger and bigger loan—because their propensity to pay us back increases over time as their business grows.
We do a lot of customer interviews to understand their needs because sometimes they need something that we, for instance, do not offer. In the future, we want to tailor products around their needs. I would expect that as businesses grow, at some point, they would also migrate to being underwritten by banks. But what we’ve seen so far is we can also coexist with the banks. Neither us nor the bank, in a lot of cases, can fully satisfy customers’ financing needs altogether. That’s how I see it pan out over the future—our customers will still maintain a portion with us because they had a very good experience with us, and a portion will come from the bank.
What are your future goals?
I really believe that what we’re doing here makes a massive difference. My personal goals are, in a year from now, I want to use the MRT or walk around in BGC and I want to overhear a conversation where someone says, “Hey, have you heard about First Circle? They gave me a loan, they helped me grow a business.”
What can you say about the future of SMEs in the Philippines?
Germany will not be where it is today without all the SMEs. And I would love to see the same thing in the Philippines where, at this stage, people are becoming a lot more entrepreneurial, but it is still quite cumbersome sometimes to be an entrepreneur because of various reasons like getting financing getting BIR, SEC, etc.
I think the sheer number of SMEs will grow exponentially because there will be more financing. It will be easier to start a business. The opportunities for us to create new products are going to improve and increase. Hence, we can serve a lot more customers.
What is your management style?
I would say I am a very collaborative leader, and I try to understand the person I’m dealing with and the local culture as much as possible. When I worked in Germany, I was always extremely direct. Here, I still try to be as direct as possible, but at the same time, you need to be sensitive about the culture.
What can you say about working with Filipinos?
I would say that’s one of the prime reasons why I’m still here in the Philippines. I like the entire country, and I like the personality of the Filipinos, which is extremely friendly, extremely open, which sometimes also poses challenges because people don’t necessarily express their opinions all the time. There is always a barrier between Filipinos and foreigners where they hesitate to tell you the truth. So I’m trying to bridge that gap.
This first appeared in Philippine Primer’s English magazine January 2020 issue.