PETALING JAYA: The aggregate electronic money (eMoney) payments are expected to double by 2025 in South-East Asia but it may not be sufficient to sustain the provider’s ambitious growth plans.
S&P Global Market Intelligence expects eMoney payment revenues in four countries – Indonesia, Thailand, Malaysia and Singapore – to reach US$905mil (RM4.03bil) in 2025 from US$544mil (RM2.42bil) last year.
S&P expects large technology companies in South-East Asia including Sea, Grab and GoTo to accelerate their pivot toward digital banking, as there is inadequate digital payment revenues and this could not sustain their ambitious growth plans.
It said the eMoney revenue opportunity for eWallets is not significant enough for financial technology (fintech) companies.
It added that it is difficult to generate positive margins on a transaction level in South-East Asia.
Some of the large eWallets pivoting towards digital banking in this region are Axiata Group Bhd’s Boost eWallet, Ant Group Co Ltd’s Alipay and Lazada Wallet, Singtel (Dash), Grab Holdings Inc (Grab, OVO), Naver Corp (Line Pay) and Sea Ltd (Shopee Pay).
In Malaysia, five consortiums have been awarded digital banking licences and they include Axiata’s Boost Holdings Sdn Bhd and RHB Bank Bhd.
The others include GXS Bank and Kuok Brothers Sdn Bhd; Sea Ltd and YTL Digital Capital Sdn Bhd, Aeon Financial Service Co Ltd, AEON Credit Service (M) Bhd and MoneyLion Inc, and KAF Investment Bank Sdn Bhd.
“Our analysis of the financials of large tech companies shows that greater engagement of lending products boosts revenue efficiency.
“For instance, Sea’s fintech revenue in the first quarter of 2022 jumped 460% year-over-year compared to a 150% rise in total payment volume as the usage of ‘buy now, pay later’ and other lending products grew,’’ S&P said.
It said the three technology companies – Sea, Grab and GoTo – plan to control both manufacturing and distribution of financial services.
By nudging users toward their proprietary products, they will seek to replace traditional financial institutions and capture greater profit pools in the industry.
As a result, S&P expects the fintech segments of the three companies combined to handle a total payment volume (TPV) of US$44bil (RM196bil) in 2021, up from US$25bil (RM111bil) in 2020.
“More importantly, lending and other financial services are increasingly driving their TPV. With the three companies seeking to lock online shoppers into their ecosystems and permeating nearly all activities of personal consumption, their affiliate digital banks are poised to grow,” it added.
However, it said incumbents will run the risk of being left out of the fast-growing digital ecosystems.