SINGAPORE — The high-cost battle to capture Southeast Asia’s growing e-wallet market has claimed a major casualty, with Singaporean start-up Razer announcing it will shut down a business that had over 1 million users.
Razer, primarily a gaming hardware maker, will stop its Razer Pay e-wallet at the end of September. The withdrawal could make other tech companies rethink their e-wallet strategy and pave the way for industry consolidation.
Originally, Razer started the payment service to allow gamers to buy its gaming items online. Then it expanded the service for nongamers by installing it at offline merchants such as convenience stores and even vending machines. Touted as an “e-wallet for youths and millennials,” it targeted young consumers, including those who do not have a bank account or a credit card.
But competition in the field only intensified. Like Razer, many tech companies entered the e-wallet space as an extension of their existing business, such as ride-hailing, hoping to tap the region’s nascent payment market. Malaysia alone, for example, had 53 providers as of October last year, of which 47 were not banks, according to a report by S&P Global.
The biggest e-wallet operators in Southeast Asia include Singapore’s Grab and Indonesia’s Gojek. They have been aggressively expanding GrabPay and GoPay as the core of their “superapp” strategies. There are also well-funded local champions such as Vietnam’s MoMo. Traditional banks, like DBS Group Holdings, also have a strong presence.
Notably, Singapore’s e-commerce giant Sea has dramatically increased its e-wallet presence over the past year as the COVID-19 pandemic accelerated digitalization. It spent as much as $166 million on marketing its digital finance business during the April-June quarter, such as cash-back campaigns, resulting in a quarterly operating loss of $159 million for that business.
With Razer heading for the exit, the pressure is growing for other e-wallet players.
“Losses appear to be mounting for technology firms,” an analyst at S&P Global said in the report, pointing out that revenues from payment services are limited. “The e-money market could see consolidation, and the tech firms are likely to seek mergers or close collaborations.”
Kapron pointed out that a unique value proposition is critical for an e-wallet. “The e-wallet space in ASEAN won’t be won necessarily by size, but by ecosystem,” he said, noting that Tencent Holdings’ WeChat Pay in China is successful because millions of Chinese use the app not just to pay for things but also to chat with friends and be entertained.
“The ASEAN wallet that is able to provide a similar sticky value proposition that encourages users to use the platform on a daily basis will be the winner,” Kapron said.
Source: asia.nikkei.com
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