Digital payment space growing


The growing number of e-wallet companies or issuers has resulted in a very competitive space, with highly-sensitive pricing to maximise monthly active users and likely to result in the “survival of the fittest”, said Maybank IB Research. The notable names in the e-wallet space are Touch ‘n Go (TNG), (pic) Boost and Grab.

PETALING JAYA: The outbreak of Covid-19 has been the catalyst in contactless payment adoption in Malaysia, enabling businesses to drive their business forward, while ensuring the safety of their customers.

Since 2020, various innovative tech companies have been successfully funded, with committed capital amounting to more than RM4bil, according to Maybank Investment Bank (Maybank IB) Research.

However, the growing number of e-wallet companies or issuers has resulted in a very competitive space, with highly-sensitive pricing to maximise monthly active users and likely to result in the “survival of the fittest”, said the research firm. The notable names in the e-wallet space are Touch ‘n Go (TNG), Boost and Grab.

On the other hand, Maybank IB said that the competitive dynamics look better among the merchant acquirers, which are essentially providers of payment terminals and transaction processors. These include players such as GHL Systems Bhd, Revenue Group Bhd (RGB) and the banks.

“Nonetheless, new entrants like Stripe, iPay88, and Razer Merchant may limit the growth outlook of the incumbents, principally in the innovative online merchant space such as e-commerce, ride-hailing, ” the research house said in an update on the digital payments sector.

Maybank IB said despite the absence of tourism industry contribution, digital payments value and volume have shown steady growth, standing at RM23bil and 302 million, respectively, based on Bank Negara’s April 2021 statistics.

It added that the government’s efforts to implement e-payment solutions in city councils would benefit third-party acquirers in expanding their reach to the public sector.

“Nonetheless, GHL and RGB have limited exposure to the thriving e-commerce, ride-hailing, food delivery and other online services merchants who stand to gain most from the brick-and-mortar retail expenditure hurdles due to MCO 3.0, ” it added. Given full valuations, Maybank IB said it was “neutral” on the sector for now, with “hold” ratings for both stocks.

GHL Systems had a slow start for the first quarter (Q1) ended March 31, 2021 with core profit growing 13% year-on-year (y-o-y) to RM5.8mil on a marginal increase in revenue.

CGS-CIMB Research in a recent note said the Q1 results missed its expectations due to a drop in shared services as banks continued to scale back on point-of-sales (POS) terminal deployments due to the fallout from Covid-19.

The research firm said it expects challenging near-term prospects, especially in the second quarter, following the reimplementation of MCO 3.0. However, it said that GHL indicated that banks were still looking to invest in and deploy new POS terminals, but the order rollout has been delayed to the second half of the year due to the pandemic.

Moving forward, it said GHL plans to introduce new products such as the “buy now, pay later” scheme and money lending to drive higher margin expansion beyond financial year 2021.

As for RGB, its revenue for Q3 ended March 31, 2021 came in at an all-time high of RM29.1mil. This translated into a strong core net profit of RM4.1mil – a rise of more than 400% y-o-y, which brought profit for the nine-month period to RM9.9mil. Hong Leong Investment Bank Research said the results beat expectations. RGB’s recent acquisition of ScanPay (a licensed Ee-money issuer) and Wannatalk are seen as favourable, allowing it to build a complete ecosystem in this area.

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