Razer has strong momentum for its “global youth bank” project thanks to a solid performance in 2020. The company posted its first ever profit last year, with solid growth in fintech services. Revenue from its fintech arm rose 66.8% year-on-year to US$128.4 million and contributed about 21% of the group's gross profit, up from about 19.5% a year earlier. Total payment volume for its fintech business doubled on year to $4.28 billion in 2020.
To be sure, gaming hardware is still Razer’s bread and butter. Revenue in that segment increased 51% to US$1.08 billion (out of total revenue of US$1.2 billion). With most of the world working and playing from home, 2020 was a great year to be a gaming hardware maker.
The next step for Razer is to further grow its fintech business. Without a banking license, it will be limited to payments, where margins are unremarkable. Fortunately, there are two Southeast Asian markets where Razer can apply for a digital banking license.
The first is Malaysia, the only market where Razer’s digital wallet is in wide use besides Singapore. Hong Kong-listed Razer has a market capitalization of $3.5 billion, allowing it to easily meet the Malaysian central bank’s capitalization requirements for digital banks. Bank Negara Malaysia is urging non-financial firms to apply for digital bank licenses – another plus for Razer. The gaming hardware maker’s focus on the youth market should also appeal to the regulator, which says that digital banks should focus on “unserved and underserved” Malaysians. Finally, Razer’s value proposition should better stand out in the Malaysia digital banking race, where it will not have to compete against both Grab and Sea. Grab may apply for a license, but Sea will not.
Razer could also apply for a digital banking license in the Philippines, where the concept of a youth bank may resonate more strongly than in Malaysia or Singapore. The median age is about 42 in Singapore and 30 in Malaysia, while in the Philippines it is less than 26.
"So, where our focus [is] right now is to really kind of use the opportunity and the dollars to grow that presence, build the pipes, make sure that we are connected into more and more countries,” Li Meng Lee, chief executive of Razer Fintech, said in a March earnings call.