Digital Financial Services Will Be Sea Limited’s Next Growth Engine

Sea Limited (NYSE:SE), the leading engineering corporation in Southeast Asia, sent a solid efficiency in the third quarter of 2021 many thanks to the development of Garena (gaming) and Shopee (e-commerce). Still there are indicators Garena’s expansion is slowing thanks to its currently huge foundation of nearly 730 million lively consumers.

In gentle of this development, buyers are looking for Sea’s future advancement motor. Thankfully, they need not look way too significantly since Sea’s fintech enterprise is poised to acquire up the mantle in the coming several years.

Smiling customer using phone.

Picture resource: Getty Photos.

A quick introduction to Sea’s fintech organization

Sea’s fintech small business operates beneath SeaMoney, the 3rd business phase just after Garena and Shopee. Proven in 2014, SeaMoney presents financial solutions these as cell wallets, payment processing, and credit history goods to customers in 7 marketplaces across Southeast Asia and Taiwan beneath numerous brand names, together with ShopeePay, AirPay, and SPayLater, between other individuals.

With SeaMoney, the enterprise aims to replicate the success of Ant Group — Alibaba’s fintech arm — in its current market by leveraging current Garena and Shopee users. Sea set up AirPay early on to facilitate payment processing for Garena’s consumers, but it has considering the fact that expanded into other choices and released new use instances to cater to buyers over and above its gaming ecosystem.

Even though it is really also early to declare victory, SeaMoney has shipped some powerful overall performance in the last handful of quarters. Payment quantity has greater at a triple-digit speed in every of the past a few quarters, when quarterly paying out consumers (QPU) achieved 39.3 million in the latest interval, up about 120% yr above 12 months.

A sea of option

When SeaMoney is growing properly, it has simply scratched the area of its option. E-wallets accounted for just 3% of all payments in Southeast Asia in 2020, according to the e-Conomy SEA 2020 report from Google, Temasek, and Bain & Firm. The report also predicted e-wallet’s gross transaction benefit (GTV) will just about double to $1.2 trillion from 2020 to 2025. Even then, e-wallet payments will account for merely 6% of complete GTV in the region.

SeaMoney reported complete payment quantity of $4.6 billion in the most current quarter. Annualized to $18.4 billion, which is fantastic for a market place share of about 3%. In the coming decades, not only can SeaMoney improve its payment quantity by driving the broad expansion of the industry, but it can also broaden its marketplace share in just the room.

Moreover, payments are just one particular aspect of this huge possibility. SeaMoney can further present further expert services like credit, investment, insurance policies, and others. For case in point, ShopeePay has now launched SPayLater, a get now pay back afterwards (BNPL) service to skilled ShopeePay consumers. SeaMoney also not too long ago obtained a electronic banking license in Singapore, which is a initially move toward turning out to be a complete-fledged electronic fiscal service company. Early this year, Sea also obtained a bank in Indonesia to develop its presence in that current market.

What to expect in the coming quarters

It is now apparent SeaMoney has a large amount going for it, but what should really traders be monitoring in the vicinity of time period? Below are a handful of things that could happen in the next yr or two.

As a get started, SeaMoney will very likely spend heavily to improve its e-wallet customers and payment quantity. In this article, investors can acquire hints from Shopee. Started in 2015, the e-commerce segment has grown to become a leading participant in most of the marketplaces exactly where it operates. Shopee took Lazada by storm in Southeast Asia and is even challenging Mercadolibre’s dominance in Latin The usa. And with Shopee CEO Chris Feng taking demand of SeaMoney considering the fact that early this 12 months, buyers must count on to listen to far more updates from the fintech organization in the coming quarters. In actuality, SeaMoney can scale even a lot quicker than Shopee experienced, taking into consideration that it can easily leverage the current customers of its sister corporations.

Additionally, SeaMoney will likely introduce more economic expert services in the more mature marketplaces. To this finish, the fintech could possibly commence rolling out new merchandise in Singapore, specially due to the fact it has presently gained the electronic banking license. It really is also seeking to acquire much more banking licenses in other locations, which we are going to probable hear additional about in the coming quarters.

This report represents the viewpoint of the writer, who may possibly disagree with the “official” recommendation placement of a Motley Fool top quality advisory provider. We’re motley! Questioning an investing thesis — even just one of our have — aids us all consider critically about investing and make selections that support us turn out to be smarter, happier, and richer.

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