E-wallets in Southeast Asia won’t stop burning cash

Dear readers,

We’ve been writing a lot about e-wallets across Southeast Asia. One thing’s for certain: If you’re not among the top two players in your market, you might struggle.

Vietnam has too many digital wallet operators, and consolidation seems imminent.

In Indonesia, GoPay and Ovo are dominating the scene, but a new contender has arrived with guns blazing. Shopee, it seems, is putting plenty of resources behind promoting its fintech play.

Chris Feng, CEO of Shopee and Sea Money / Photo credit: Shopee

The financial statement of Sea, Shopee’s parent firm, says as much: Its fintech loss for the latest quarter is up 500%, reaching US$110 million.

If Sea wants to, that number could go up a lot more. It has US$3.4 billion in cash and cash equivalents, buttressed by over US$400 million in quarterly profits from Garena, Sea’s gaming arm.

Who can match this? Probably Grab – if its investment talks with Alibaba comes to fruition. Even so, it doesn’t have a Garena.

With Shopee’s eyes turning toward the e-wallet space, it seems the cash burning will continue, at least for a while.

Competing head-on against Shopee might be suicidal unless you have the cash to match – like Ant Group.

Set to raise US$30 billion, the Alibaba-affiliated Chinese giant could be a real threat to Western payment duopoly Visa and Mastercard. But the real opportunity for Ant may lie in markets where those two players aren’t dominant, according to our China reporter Nicole Jao. Indonesia is one such market.

Some fintech startups in the country, however, seem to be alive and well. This CEO, for example, is building Payfazz, to become the “Google Play of financial services” for Indonesia, our correspondent Aditya Hadi writes.

Instead of battling moneyed e-wallets in Tier 1 cities, Payfazz has dived straight into second- and third-tier cities by setting up a physical agent network.

It needs to move fast as there’s no telling how soon tech giants will encroach on its territory. Right now, Payfazz is approaching US$2.2 billion in annual payment volume, an encouraging sign.