Authored By Louis Stevens
In this Brief, we will consider Sea Ltd.'s FinTech business, SeaMoney, nested within the "macro" secular trends that are driving its growth.
Let's review these "macro" secular trends, then consider SeaMoney.
To start, according to Google, Bain, and Temesak, roughly half of SE Asians have not adopted a digital product of any kind, which means, as it relate to SeaMoney, they've not adopted a financial technology product, such as a payments wallet like SeaMoney, which offers financial services such as consumer credit.
Moreover, 20-30% of SE Asians still do not have access to the internet.
The Two Left-Most Charts Provide The Basis For The Growth Of The Three Right-Most Charts
This data was recently corroborated by a report that the United Nations Capital Development Fund produced in which it asserted that:
"Despite many customers reporting increased access to credit through FSPs (financial services providers), there remains a large, untapped market in Southeast Asia. About 225 million Southeast Asians lack bank account access and 350 million do not have access to formal credit. Additionally, 39 million micro, small, and medium enterprises face a funding gap of up to US $300 billion."
SE Asia Financial Inclusion Report
As we've seen in China and Latin America, the vast majority of these unbanked individuals will skip the traditional financial system and integrate directly into the digital financial services ecosystem, such as SeaMoney or GrabPay.
These key pieces of data illustrate that SeaMoney has a huge runway for growth ahead, and these key pieces of data also reveal why SeaMoney has grown at such a meteoric rate in recent years.
Digital Financial Services Lending Revenue Has More Than Doubled In The Last Two Years In SE Asia
Launched in 2014, SeaMoney has grown from $0 in total revenue to, today, $2B/year in free cash flow generative revenue.
SeaMoney Continues To Achieve New Heights, Generating ~$500M In Total In Q1 2024
SeaMoney grew at 21% year over year in Q1'24; however, notably, it grew 6% from Q4'23 to Q1'24, which annualized, is a growth rate of 25%.
In light of the incredibly long runway that digital financial services have in SE Asia, I believe it's entirely possible that SeaMoney's growth accelerates from its Q1'24 rate of 21%.
“SeaMoney has continued its strong growth momentum and profitability into 2024 while maintaining prudent risk management.” Commenting on future growth, Sea Ltd. CEO Forrest Li said, “We anticipate further growth for our digital financial services business throughout the year. As we healthily grow our user base, we will be able to offer a broader set of financial services to meet our users’ needs in the future.”
These set of needs were illustrated in the Google, et al. chart shared just a moment ago. With that chart in mind, we can see below that SeaMoney's loan business has grown at healthy rates in recent quarters, while non-performing loans (loans that folks aren't paying back) remained very low.
The Growth Of SeaMoney's Loan Book
In closing, hopefully, this Brief contextualized the growth of SeaMoney and instilled confidence that, irrespective of near term fluctuations in growth rates, SeaMoney has an incredibly, incredibly long runway for growth still ahead, to the tune of hundreds of millions of potential new customers in the years and decades ahead.
Disclosures:
L.A. Stevens has rated Sea Ltd. a "buy."
