Why Alibaba-owned Lazada is doubling down on payments in Southeast Asia

REUTERS/Darren Whiteside

Last week, Lazada, the Southeast Asian e-commerce platform owned by China’s Alibaba, roped in a former Alipay executive as its head of payments for the region — a newly-created role.

The move to hire Dayong Zhang — the ex-Southeast Asia general manager of Ant Group-controlled Alipay — is a sure sign that the company wants to push itself into the growing fintech segment where rivals Grab and Sea Ltd, have had a head start.

“The recent organisational changes are in line with Lazada’s strategic direction to continue to drive operational efficiencies for our brands and sellers, and continue serving the needs of our consumers in Southeast Asia,” Lazada said in a statement. It declined to disclose further details about the move.

Lazada’s move to jumpstart its payments service is about ensuring it does not fall behind its superapp and e-commerce peers, said analysts DealStreetAsia spoke to. “They [Lazada] are seeing [Sea Ltd-owned] Shopee’s presence really growing and they are feeling the heat,” said Joshua Chong, a consultant with the fintech consultancy firm Kapronasia.

The company has an existing e-wallet called Lazada Wallet. 

“Better late than never”

Though users may already be using ShopeePay, or GrabPay and FavePay for their purchases, the payments space in Southeast Asia is still relatively nascent, observers said. “It’s better late than never,” said Xiaofeng Wang, a principal analyst at research and advisory firm Forrester. “No one is dominating the market yet. There is still a chance of getting a piece of the market especially by leveraging the strong customer base of Lazada.”

Given Alibaba’s deep pockets — the company’s net cash from operating activities stood at $5.2 billion as of end-June this year — Lazada has the ability to launch aggressive marketing campaigns to attract merchants and consumers to use its payments solutions, said Wang.

Alipay’s rivalry with WeChat Pay in China, where the former leads in market share, could inform Lazada’s fight with Southeast Asian players as well, she added.

Localisation

As for why Lazada could possibly develop its own payments arm instead of directly using Alipay, it is all about localisation, just like how Alibaba kept the Lazada name, when it acquired the company in 2016, instead of replacing it with TMall and Taobao.

In Southeast Asia, the Lazada name is more well-known than Alipay, Chong said. At the same time, consumers in this region could be suspicious of Chinese brands.

China also has its own data privacy regulations, which means it makes sense for Lazada to keep its payments arm separate from Alipay, said Wang.

That said, some of the back-end infrastructure could be built off Alipay’s existing technology. Lazada’s current payments processes are already powered by Alipay. 

Payments would just be the first step if Lazada plans to become a major fintech player.

Like other e-commerce players, it could roll out services in buy-now-pay-later (BNPL) — it currently works with banks and third-party fintech and BNPL firms to offer instalment plans — wealth management, and insurance for e-commerce purchases, said Chong.

Lazada, which serves Indonesia, Malaysia, Vietnam, Singapore, Thailand, and the Philippines, recorded year-on-year order growth of over 90% as of end-June this year, according to Alibaba’s latest financial results.

It said it was focusing on localisation to meet preferences in Southeast Asia’s different markets. The platform claims to have over 150 million monthly average users.

Sea Ltd-owned Shopee is currently the dominant e-commerce player in Southeast Asia. It topped in terms of the number of average monthly active users and total time spent in-app by consumers in the second quarter of this year, according to data from App Annie.

Lazada’s moves comes even as Sea has been trying to develop its fledging fintech arm SeaMoney, and has heavily promoted its e-wallet on the Shopee app with discounts and cashbacks.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.