Roundhill recently did a Q&A with Li Meng Lee, CSO of Razer Inc and CEO of Razer Fintech. We discussed COVID-19 and the potential impact on the company and the broader gaming industry as well as Razer's position in financial services.
Before we dive into the core conversation, I just wanted to mention a story we recently shared on our social about Razer converting production lines amid Covid-19 outbreak from keyboards to surgical masks. Personally, I love to see companies thinking outside the box about how they can help. How did this come to pass?
While there has been incredible demand for our products during this time with many staying home to avoid the crowds (and to play games), the team at Razer understands that all of us have a part to contribute toward global fight of COVID-19 – no matter which industry we come from.
The emergency conversion of some of our lines and donation of masks is the first step of many that Razer will take. We are committed to contributing our extra time, resources, effort and talent toward the fight against COVID-19.
And maybe something to add with regard to our initial assessment of COVID-19 impact on our operations so far.
Essentially, we are a “stay-at-home” stock. We expect to see continued growth for Razer gaming ecosystem of hardware, software and services propelled by global “stay-at-home” situation because of increased gaming activity
We have no debt and a strong cash position of over US$500 million, this puts us in a strong position to weather and continuing growing even in challenging economic situation.
Many of our readers likely know you as a gaming company. You certainly are a gaming company, but you are building out a Fintech business that, to me, is super interesting. Can you talk a bit about the approach Razer is taking to financial services and how this fits within your other business lines?
In a 2018 study by E&Y, it found that only 29% of millennial respondents had a “great deal” of confidence in banks and financial institutions. In addition, we noticed that the youth feel that current financial products/ services are not tailored for them and that new financial products/ services lack innovation to address experiential youth lifestyle.
At Razer, we are building an integrated ecosystem of hardware, software and services around gamers/ youth or millennials. Razer’s global presence and strong brand authenticity with the global youth and millennial population that we built up over the years are what sets us apart in our Fintech strategy. According to Newzoo, over 70% of millennials are gamers. Over 80% of our 80 million registered users are under the age of 35.
Razer Fintech, our financial technology arm, has already seen robust traction as one of the largest offline-toonline digital payment networks in Southeast Asia. In 2019, Razer Fintech recorded a strong 50% year-on-year growth in total payment value (“TPV”) of US$2.1 billion. We believe that addressing the unmet financial needs of the large, yet underserved, youth and millennial segment of the population through an innovative digitalfirst banking platform is a natural extension of our payments business.
You mentioned a “general distrust” of traditional banking services amongst younger consumers. This is something we’ve identified as well. Why is this the case, and how are you thinking about building a financial services company that does right by their users?
We notice that authenticity is a trait most commonly looked for by the youth/ millennials when it comes to brand connection, far much more than people in the older generation.
People are passionate with all the products and services that has been launched by Razer, we’ve become a lifestyle brand for youth and millennials. We think it’s because we’ve always been very authentic, and we’ve always stuck to our roots.
Gaming today is a multibillion dollar industry and virtually all youth play games. We think it’s safe to say that (if you’re cool), Razer is a defining brand for the global youth population. Razer has the largest integrated ecosystem of hardware, software and services that accompanies the gamer’s lifestyle, we are hyper focused in meeting all needs of gamers.
And specifically for our fintech business, where we are leveraging on Razer’s strong brand affinity with youth and millennials, a deep understanding of youths, and an extensive technology and fintech expertise. These, together with our open banking platform and ecosystem approach of collaborating with best-in-class industry leaders and lifestyle partners, will enable us to create and deliver highly innovative and bespoke financial services solutions to address the lifestyle needs of youth and millennials.
Razer recently applied for a digital banking license in Singapore – can you talk a bit about this process, as well as any plans you have to build a financial services business outside of Asia, specifically any plans you have for the US market?
In January 2020, we have announced that Razer Fintech has submitted its application for the Digital Full Bank License to be issued by the Monetary Authority of Singapore (“MAS”). According to the guidelines issued by MAS, the announcement of the award of the digital banking licenses is expected to be in mid-2020.
We do have ambitions to build a global youth bank, Razer Youth Bank, regionally and globally. It’s early stages to provide specifics on exact countries, but stay tuned!
What’s the competitive landscape like, and why do you think your offering will ultimately be compelling to your target demographic?
In the payments space, the beauty of our fintech business unlike any other similar businesses, is that we have a combination of B2B and B2C businesses, in which B2B generates the majority of Razer Fintech’s total processing volumes. Our B2B “Razer Merchant Services”, which consist an online processing gateway and offline payments business, has been ramping up quickly with the onboarding of global merchants. In addition to the payment capabilities that we offer, merchants need to only deal with one single point of contact rather than having different payment processing partner in different regions given we have the broadest coverage in the region.
Final question here – we’ve talked about the payments space, what other areas of the financial services ecosystem are you looking at disrupting?
We are hyper focused in meeting all needs of the youth and millennials
Specifically for financial services, it really is serving the needs of the large yet underserved segment of youth and millennials. Apart from creative digital banking solutions on the consumer retail level, we also intend to serve the needs of entrepreneurs, start-ups and small and micro enterprises which have had challenges to gain access to capital to fund growth and digital transformation strategies through innovative financing solutions and credit scoring methodologies.
Razer is an Index holding in the Roundhill BITKRAFT Esports Index. This post is not investment advice, nor is it a recommendation to buy or sell a security.