Summary: 2024 is an important moment for Chinese companies to go global. Behind the rapidly growing cross-border e-commerce trade, the "water sellers" of supporting services and resources for overseas enterprises have become the most solid backing, including cross-border platforms, logistics, payment, marketing services, and exhibition services. How do cross-border payment platforms solve payment issues such as collection, payment, and exchange rates for enterprises? What are the other highlights in the cross-border payment industry worth paying attention to? Through the perspective of Wei Ping, the Chief Financial Officer of LianPay, we will decrypt it exclusively.

Looking at the global market, with the rise of new markets, new platforms, and new consumer trends, consumers' demand for e-commerce continues to be strong, giving Chinese brands, traditional traders, and foreign trade factories with vast development space in going global and finding gold.

According to the statistics of the General Administration of Customs, in the first half of 2024, the scale of China's cross-border e-commerce import and export reached 1.22 trillion yuan, with a year-on-year increase of 10.5%, becoming the new engine driving the growth of China's foreign trade.

As the "first stock of cross-border payment", LianPay (2598.HK) plays a key role in promoting trade connectivity and facilitating cross-border settlement. With rapid growth in business scale, it has successfully emerged in the industry.

Recently, Ms. Wei Ping, the CFO of LianPay, was interviewed by Hong Kong TVB's "Financial Talk" program, talking about the current situation and prospects of the cross-border payment industry, and introducing LianPay's exploration and practices in the industry. In this interview, Ms. Wei Ping provides us with valuable information and insights to help us better understand the development trends and investment opportunities in this industry.

With multiple businesses advancing together, long-term profitable development can be achieved.

With the booming development of cross-border e-commerce, many companies want to develop cross-border e-commerce businesses, but they encounter difficulties at the source, especially when it comes to fund collection and payment issues between multiple countries. As a key infrastructure, cross-border payment truly helps enterprises overcome a series of payment barriers in multinational operations.

In the interview, Ms. Wei Ping mentioned that it is not easy for Chinese companies to receive money in their corporate accounts after selling products on e-commerce platforms such as Amazon. This is especially true for small enterprises, as it is almost impossible for them to open bank accounts overseas. Cross-border payment services help them retrieve the money.

In this process, the cross-border payment industry has experienced rapid development. Unlike Alipay and WeChat, which mainly serve domestic consumer payment business, cross-border payment service providers like LianLian Pay offer global payment solutions for Chinese companies, including digital payments.

Taking LianLian Pay as an example, the company's main revenue comes from global payments, domestic payments, and value-added services. Based on the previous mid-term financial report, there are many highlights.

LianLian Pay's revenue for the first half of the year was 0.617 billion yuan, with a year-on-year growth of 40.1%. Among them, global payment service revenue increased by 21.9% to 0.372 billion yuan, domestic payment revenue increased significantly by 117.8% to 0.17 billion yuan, and multiple business sectors developed simultaneously.

When it comes to revenue performance, Ms. Wei Ping points out that "the company's digital payment transaction volume in the first half of the year increased by more than 120%, three times the industry average. Our performance in the market is better than the industry as a whole."

To achieve these results, LianLian Pay has deeply cultivated the Chinese market and actively expanded its business layout globally.

Regarding global payments, Ms. Wei Ping affirmed the strong momentum of China's cross-border e-commerce industry, which has driven the development of many payment institutions, including LianLian Pay. She also pointed out the key role played by LianLian Pay, "We serve the global expansion of Chinese enterprises and provide services related to value-added needs, helping Chinese products and production capacity to go global."

Regarding domestic payments, Ms. Wei Ping shared the key reason for the company's rapid growth. "The company is deeply rooted in the mainland. As our product capabilities continue to improve, our products meet the needs of enterprises to reduce costs and increase efficiency, thereby improving the efficiency of enterprise fund flow and related value-added cost reduction, resulting in the rapid development of our business."

In response to the significant difference in gross margin between global payments and domestic payments, Ms. Wei Ping also provided an answer in the interview.

On the one hand, from the perspective of charging factors, the fees for the two businesses are different, and the charging level for global payments is relatively high; on the other hand, from the perspective of cost and expense factors, compared with domestic payments, the cost composition of global payments is relatively simple, coming from e-commerce platforms such as Amazon and domestic bank channels, and there are more licensing compliance and technology investment expenses that will not be reflected in operating costs.

When discussing the level of gross margin, Ms. Wei Ping emphasized that the gross margin of the company's global payment business is at a good level in the industry. The gross margin of the domestic payment business in the first half of the year decreased compared to the same period last year, which is actually driven by the company's rapid growth in new businesses, and the gross margin of the new businesses is relatively lower. However, Ms. Wei Ping also pointed out that overall, the gross margin of the domestic payment business is still significantly better than the industry average.

In response to questions about profitability, Ms. Wei Ping responded and dispelled the concerns of investors focused on LianLian Digital. 'The company has achieved operating profit, and the losses in the first half of the year are mainly due to the impact of some non-operating projects.'

Combining the financial report, it can be seen that this includes specific one-time expenses such as share-based compensation expenses of 12.8 million yuan, and listing expenses of over 37 million yuan, as well as a share of the loss from the affiliated company Liantong company of about 200 million yuan. After deducting these items, LianLian Digital's daily operations generated an operating profit of 16.66 million yuan.

This means that the feasibility of LianLian Digital's business model has been validated, and it is expected to demonstrate strong monetization potential based on the growth trend. Ms. Wei Ping expressed strong confidence in this, 'In the future, the company will continue to make sustained strategic investments and is also expected to achieve sustained and profitable development under a unified approach.'

Continuously consolidating competitive barriers and adhering to prudent operation to embrace future opportunities.

Currently, LianLian Digital is continuously strengthening its core competitiveness, expanding its global market and customer coverage, in order to embrace more growth opportunities.

In terms of business strategy, Ms. Wei Ping pointed out, 'LianLian Digital has always started from the perspective of customer needs to serve customers in different regions.' This is the key reason for the company's stable operation. Ms. Wei Ping further emphasized the need to consider overall revenue instead of looking at gross profit margins or profit differences by region. In the long term, by operating in different regions, the company is better able to cope with fluctuations in a single market and maintain stable business growth.

Ms. Wei Ping is confident in the long-term growth of the company. Currently, LianLian Digital has built a strong competitive barrier and is continuously consolidating it.

The primary factor is the expanding advantage of licenses. Currently, the company has established a global license layout consisting of 65 payment licenses and related qualifications. In the first half of the year, the company successfully obtained the Luxembourg EMI license, accelerating its penetration of the European market and further consolidating its industry leadership position.

Ms. Wei Ping analyzed this, 'Licenses bring security and peace of mind to customers, who are willing to conduct business globally with LianLian Digital, thereby increasing customer stickiness.'

When it comes to obtaining global licenses, LianLian Digital demonstrates stable operation, often evaluating whether to continue getting more licenses based on market and customer demand. With the advantage of licenses, LianLian Digital can provide stable services to Chinese companies going global, helping them expand globally and continuously enhancing their competitiveness in the global market.

Ms. Wei Ping confidently stated in the interview, 'For customers, LianLian Digital has a certain degree of irreplaceability.' This reflects the rare value that LianLian Digital contributes in the process of empowering enterprises to go global. In my opinion, this also represents the scarcity that LianLian Digital possesses as an investment symbol for investors.

At the same time, LianLian Digital is expanding its customer coverage, meeting diverse needs, and providing corresponding solutions based on demand. Ms. Wei Ping pointed out, 'The company has the ability to serve small and medium-sized enterprises as well as large enterprises. In terms of cross-border payments, the company mainly serves small and medium-sized enterprises, while for large domestic enterprises, the company provides digital solutions for their marketing and cost ends.'

In the long run, LianLian Digital focuses on a wider range of customer groups, and creates customized payment solutions for various types of industries and companies. It can deeply explore the diverse needs of customers, thus LianLian Digital will form a stronger differentiation advantage in the market competition.

In addition, providing personalized value-added services is also a key factor in the future development of LianLian Digital. Ms. Wei Ping pointed out the importance of value-added services and continuous investment in value-added services. Through comprehensive value-added services, it will enhance customer experience and stickiness, further improving competitiveness. With the increasingly diverse customer needs, the growth potential is strong.

Looking forward to the future, the biggest opportunity for LianLian Digital still lies in the Chinese market. From the macro environment, in the first half of 2024, China's GDP is expected to grow by 5.0% year-on-year, and the national economy continues to recover and improve. China remains an important engine and stabilizing force for global economic growth.

Ms. Wei Ping pointed out, "In the process of Chinese products and production capacity going global, a large number of development opportunities will emerge. LianLian Digital has been serving Chinese companies, whether the service path is domestic development or seeking overseas expansion, LianLian Digital will accompany the growth of Chinese companies."

With the vigorous development of e-commerce and the growth of global trade, there is reason to expect that LianLian Digital will continue to leverage its competitive advantage in this field, continuously achieve outstanding performance, and provide stable returns and growth potential for investors.