Specialist
Former divisional head at ShopeePay (Shopee Ltd)
Agenda
- ShopeePay’s (NYSE: SE) revenue mix in Malaysia and 2023 expectations given deprioritisation of offline adoption
- ShopeePay’s merchant acquisition and incentive cost overview in Malaysia
- Competitive implications of ShopeePay’s strategic shifts vs competitors such as Boost (KLSE: AXIATA)
- Stagnant penetration of ShopeePay for Shopee orders and effectiveness of free shipping vouchers
- Challenges associated with growing SPayLater and collection efficiency evaluation
Questions
1.
I understand that SeaMoney, or ShopeePay more specifically in Malaysia, has played a role in rolling out financial assistance in Malaysia and has worked with the government for a number of different partnerships. Does this benefit SeaMoney strategically? Does it mean obtaining licences becomes easier in the future, or are there any implications besides these government partnerships?
2.
You mentioned Axiata-Boost. Do you have any examples where Boost, perhaps as a local player, could do something more easily, but the same thing would be more difficult for ShopeePay because it’s not local?
3.
Would you say the government support Boost receives has improved, given ShopeePay’s government partnerships, or is there still quite a gap between the support Boost could get and ShopeePay?
4.
SeaMoney mentioned it is not prioritising the offline adoption of ShopeePay anymore across all countries. Do you see a similar scenario playing out on the ground? Is SeaMoney giving out fewer incentives for using ShopeePay offline, or what has been changing after the company announced this?
5.
You mentioned the cash burn was too fast with ShopeePay. Does SeaMoney see more cash burn offline vs online, or is it roughly the same and it just has to pick one to focus on?
6.
You mentioned that there are no fixed merchant acquisition costs online. If you get an online merchant that implements ShopeePay, why is there not much cost entailed here?
7.
You would estimate that offline is only 15-20% of ShopeePay’s total transaction volumes, so that means the entire remaining 80% would be online?
8.
You said that, for online, ShopeePay could even be making a slight profit. Do you mean this on a per-transaction basis, so after it charges the MDR [merchant discount rate] and pays into the issuing or acquirer bank, it still has some money left?
9.
When we say online payments are profitable, are we including any customer incentives, or is it just the MDR minus cost to process this payment?
10.
What incentives would Shopee offer to merchants for using ShopeePay? I thought it’s the user that chooses whether they want to pay with Shopee.
11.
How do merchants encourage users to use ShopeePay? Do they restrict you to only being able to pay with ShopeePay?
12.
How would you estimate the kind of customer incentive a user can get monthly if they are a frequent user of ShopeePay?
13.
Is Shopee targeting any milestone with customer incentives such as cashback and coin incentives? Could it be targeting that all coin cashback will be paid by merchants only, or is there no set milestone for this?
14.
Is Shopee targeting any milestone on a per-user basis – the company can’t get more than MYR 10 per month from coin cashbacks – or is there also no set milestone for this?
15.
You mentioned that merchant subsidies are more than the customer incentives. Have the merchant subsidies reduced over time?
16.
In terms of reducing merchant subsidies, have you seen a lot of pushback from merchants? Did they complain and decide to no longer push ShopeePay in front of customers, or are they mostly okay with it?
17.
We talked about how most online payments at ShopeePay would be towards the Shopee platform, so for Shopee orders. How about the other way around? With the total volume of Shopee orders, how would you estimate the percentage that is paid with ShopeePay?
18.
Shopee overall has a goal of breaking even by the end of 2023. In order to get there, would you expect the merchant subsidies, customer incentives or any campaigns done by ShopeePay to further reduce this year?
19.
For countries that Shopee has had presence in for quite a few years, the company is past that hyper user acquisition stage and the competitive landscape is quite stable, with it pretty much being Shopee vs Lazada in Malaysia. Would a country such as Malaysia allow Shopee to be at least close to breaking even on an EBITDA basis?
20.
You mentioned ShopeePayLater. Roughly 20% of Shopee orders are paid by ShopeePay, so how would you estimate the percentage for ShopeePayLater?
21.
For using ShopeePayLater, there is a processing fee of roughly 1.5% per month and then, if you’re late, you’re charged an additional MYR 10. Are there any other revenue sources for ShopeePayLater, besides these two?
22.
How does ShopeePayLater help with SeaMoney’s overall profitability? A standard ShopeePay transaction would be loss-making after deducting customer incentives, merchant subsidies and so on, but does that mean ShopeePayLater is profitable? How does it differ from a general transaction?
23.
How would you estimate the default rate, and how different is it compared to what you originally expected?
24.
How do ShopeePay’s unit economics work in terms of MDR, and how does charging that MDR flow to the other stakeholders, such as the payment gateway or issuing bank?
25.
With ShopeePayLater, given how it’s very difficult to increase the percentage of users that are eligible without hurting the default rate – even within Shopee’s own user base – does that mean we likely cannot expect the ShopeePayLater product to be available for non-Shopee orders as well, because then the know-your-customer process is a lot more difficult?
26.
With both ShopeePay and ShopeePayLater, there are still some components causing cash burn. Do you see any future product launches or any products that SeaMoney might prioritise to help with overall profitability, or would you say the company is not looking to launch that many products and it just doesn’t expect ShopeePay to be what allows it to break even?
