To be sure, Southeast Asia has long been important to Tencent. The large Chinese diaspora populations in Singapore and Malaysia allowed the WeChat super app to gain a foothold in those countries years ago. They are among its key international markets.
But monetizing WeChat has proven elusive outside of China, with the exception of the use of WeChat Pay by Chinese tourists. That was a growing market before the pandemic and should continue expanding once international travel resumes. Countries like Thailand, Singapore and Malaysia are top destinations for Chinese tourists.
To reach the larger local markets in Southeast Asia, Tencent has to rely on other platforms though. As a result, it has taken stakes in a large number of e-wallets. These include the digital wallets operated by Sea in the region, such as AirPay in Vietnam, Thailand and Indonesia and Shopee Pay in Malaysia, as well as Zalopay in Vietnam, Coins.ph and PayMaya in the Philippines, and GoPay in Indonesia.
For Tencent, the next step is to move beyond low-margin payments into more lucrative online finance segments. In China, Tencent achieved that milestone with its WeBank digital bank, launched in 2015. In Southeast Asia, Tencent hopes to get a digital banking license in Singapore through Sea. The Singapore-based internet company is one of the top contenders for a digital full bank license (DFB) that permits the holder to serve both retail and non-retail clients.
Like its backer Tencent, Sea is a successful provider of gaming and e-commerce services. For the millennials and SMEs already in that ecosystem, it would be convenient to have a bank account with Sea and have access to lending services as well. Indeed, Sea already has the right kind of customer base to actually promote financial inclusion if gets the DFB.
Southeast Asia is likely to become even more important for Tencent given geopolitical tensions between China and India, a huge emerging market that until recently attracted a steady inflow of Chinese fintech investment. New Delhi recently implemented restrictions on Chinese investment and banned both WeChat and Alipay.
The Indian government is reportedly concerned about the possibility of data privacy violations involving fintechs. "The potential implications of a data compromise from fintechs, such as lending apps, are quite grave, since it involves sharing sensitive financial data of the user to the lender," a source told India's Livemint.