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

Sea Limited (NYSE:SE), the primary technological innovation corporation in Southeast Asia, sent a solid overall performance in the 3rd quarter of 2021 many thanks to the growth of Garena (gaming) and Shopee (e-commerce). Nevertheless there are signals Garena’s progress is slowing thanks to its presently huge foundation of virtually 730 million lively consumers.

In gentle of this enhancement, traders are seeking for Sea’s subsequent growth motor. Luckily for us, they have to have not glimpse way too much due to the fact Sea’s fintech enterprise is poised to just take up the mantle in the coming many years.

Smiling customer using phone.

Impression supply: Getty Images.

A speedy introduction to Sea’s fintech organization

Sea’s fintech organization operates under SeaMoney, the third organization section just after Garena and Shopee. Recognized in 2014, SeaMoney supplies fiscal services this kind of as mobile wallets, payment processing, and credit products and solutions to clients in 7 marketplaces across Southeast Asia and Taiwan less than a variety of brand names, together with ShopeePay, AirPay, and SPayLater, amid many others.

With SeaMoney, the company aims to replicate the accomplishment of Ant Team — Alibaba‘s fintech arm — in its industry by leveraging current Garena and Shopee people. Sea established up AirPay early on to facilitate payment processing for Garena’s consumers, but it has because expanded into other choices and introduced new use conditions to cater to clients further than its gaming ecosystem.

Whilst it is really much too early to declare victory, SeaMoney has sent some robust effectiveness in the previous handful of quarters. Payment volume has amplified at a triple-digit pace in each and every of the past a few quarters, even though quarterly spending end users (QPU) achieved 39.3 million in the most up-to-date period of time, up about 120{797b2db22838fb4c5c6528cb4bf0d5060811ff68c73c9b00453f5f3f4ad9306b} 12 months in excess of calendar year.

A sea of possibility

Although SeaMoney is rising nicely, it has simply scratched the floor of its prospect. E-wallets accounted for just 3{797b2db22838fb4c5c6528cb4bf0d5060811ff68c73c9b00453f5f3f4ad9306b} of all payments in Southeast Asia in 2020, in accordance to the e-Conomy SEA 2020 report from Google, Temasek, and Bain & Organization. The report also predicted e-wallet’s gross transaction price (GTV) will almost double to $1.2 trillion from 2020 to 2025. Even then, e-wallet payments will account for simply 6{797b2db22838fb4c5c6528cb4bf0d5060811ff68c73c9b00453f5f3f4ad9306b} of total GTV in the region.

SeaMoney described whole payment volume of $4.6 billion in the most recent quarter. Annualized to $18.4 billion, that’s superior for a market place share of about 3{797b2db22838fb4c5c6528cb4bf0d5060811ff68c73c9b00453f5f3f4ad9306b}. In the coming several years, not only can SeaMoney expand its payment volume by using the wide advancement of the sector, but it can also increase its marketplace share inside the room.

In addition to, payments are just 1 element of this large possibility. SeaMoney can even more offer more products and services like credit history, financial commitment, insurance policy, and other individuals. For illustration, ShopeePay has now launched SPayLater, a obtain now spend later (BNPL) assistance to certified ShopeePay consumers. SeaMoney also not too long ago acquired a electronic banking license in Singapore, which is a 1st stage toward becoming a complete-fledged digital fiscal service provider. Early this calendar year, Sea also acquired a financial institution in Indonesia to broaden its presence in that market.

What to anticipate in the coming quarters

It is now very clear SeaMoney has a whole lot likely for it, but what should buyers be monitoring around expression? Below are a few issues that could happen in the next 12 months or two.

As a start out, SeaMoney will most likely invest heavily to increase its e-wallet people and payment quantity. Here, investors can choose hints from Shopee. Started in 2015, the e-commerce section has developed to come to be a leading player in most of the marketplaces where by it operates. Shopee took Lazada by storm in Southeast Asia and is even complicated Mercadolibre‘s dominance in Latin The usa. And with Shopee CEO Chris Feng having cost of SeaMoney since early this yr, buyers really should count on to listen to more updates from the fintech firm in the coming quarters. In fact, SeaMoney can scale even more rapidly than Shopee had, considering that it can simply leverage the current customers of its sister providers.

Also, SeaMoney will very likely introduce more financial expert services in the much more mature marketplaces. To this conclusion, the fintech may well begin rolling out new goods in Singapore, specifically due to the fact it has now been given the digital banking license. It is really also striving to acquire additional banking licenses in other locations, which we are going to likely listen to additional about in the coming quarters.

This post represents the impression of the author, who may perhaps disagree with the “official” suggestion placement of a Motley Idiot premium advisory services. We’re motley! Questioning an investing thesis — even 1 of our have — aids us all assume critically about investing and make choices that help us turn out to be smarter, happier, and richer.