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In Taiwan, with an annual growth of 132%, the transaction volume of mobile payment hit a record high of NT$423 billion in 2020, and electronic payment transactions accounted for over a third of the amount. Facing large-cap companies, JKOPAY, the Taiwan-based e-payment service provider, is now still in the lead of this highly competitive e-payment race.
Mobile payment consists of three systems in Taiwan: electronic payment, electronic stored value cards, and third-party payment. However, due to regulations, only licensed e-payment and electronic stored value cards are available for deposit, and only e-payment is allowed to provide transfer service.
And thus solely e-payment is able to cover the three core digital cash flow services, which include actual transactions payment and receipt, stored funds payment and receipt, and funds transfer between e-payment accounts.
In 2020, according to the Financial Supervisory Commission (FSC), 28 licensed e-payment companies totaled a NT$162.5 billion transaction amount, that is, an annual growth of 106.1%. Moreover, with an increase of 70.2%, the number of users exceeded 11.78 million. In March 2021, the number had grown to 12.82 million.
In this rapidly developing industry, however, there are now only two dominant competitors in Taiwan. Reaching 4.32 million users in March, JKOPAY, so far the major player in the market, achieved the highest user penetration rate, narrowly defeating 3.41 million users owned by LINE Pay Money, which was co-launched by LINE Pay and e-stored value card iPass.
Founded and licensed in 2016, JKOPAY is now a wholly-owned subsidiary of JKO Network, being in charge of their e-payment business. In fact, JKO Network was founded and named JKOS International Trading back in 2012, which was famous for selling 33 tons of Taiwanese mangoes to China within three days at the time.
The founder of JKO Network, Kevin Hu, who used to work as a hedge fund analyst on Wall Street, is the son of former Chairman of China Development Industrial Bank and Taipei 101, Benny Hu.
JKOPAY has now owned nearly half of the market share. With a significant annual growth of 15.5%, it accounted for 42.2% of the e-payment transaction amount. Meanwhile, by offering their users various functions such as food and beverage delivery, taxi dispatch, and payment of public utilities, it also ranks first of the transaction amount of all three core e-payment services in 2020.
By using QR codes and barcodes, both JKOPAY and LINE Pay Money can process payments via smartphones without the need for costly terminals. Yet, compared to LINE Pay, which has much larger capital, JKOPAY adopts a localization strategy.
Starting from vendors of famous night markets such as Raohe Street, Shida Night Market, and Ningxia Night Market, it gradually entered physical storefronts such as hand shake beverages shops. JKOPAY are now accepted by more than 80,000 brick-and-mortars in Taiwan.
In 2020, JKOPAY partnered with FamilyMart, whose members are almost half the population of Taiwan. JKOPAY integrated the loyalty card system of FamilyMart with JKOPAY’s barcode, so that members of FamilyMart can complete payments, points collection, and cloud invoices storing with JKOPAY within 3 seconds.
JKOPAY has also developed its overseas market since 2018. By partnering with InComm, a leading payments technology company, JKOPAY has their system accepted at more than 18,000 retailers across Japan, including drug stores and home appliance stores.
However, despite the fact that the operating expense doesn't expand with the scale of business, since the cost is remaining obstinately high, JKOPAY is still burning cash on its e-payment business.
Compared with the loss of NT$347 million in 2019, as there was about NT$ 9 million of non-operating revenue, the deficit fell slightly. Nevertheless, the net operating loss is still as high as NT$355 million in 2020, with a NT$346 million of after-tax loss.
Besides, as e-payment business cannot earn interest from the user's stored value balance, nor can it use the funds to make investments, it is uncertain if these gains are mainly from JKO Asset Management, which holds 25% of its shares.
Therefore, in order to develop a business model with better profit margins, JKOPAY has come up with a solution of launching fund investment products such as Alibaba's Yu Ebao in China, even though the process hasn't been running smoothly since regulator, the FSC, doesn't approve it.
However, as FSC is going to amend the Act of Governing Electronic Payment Institutions in this July, it will surely allow greater flexibility of business development for e-payment service providers.
As large-scale retail companies and e-commerce platforms such as offline retail giants like PXMart and top online player Shopee are also ready to join the e-payment race since they have all applied for the e-payment license since 2020, it's still early to scratch the long-time champion from the race.
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