Razer is known to most as a gaming company, but it has since made headway into the fintech arena.
As part of TechinAsia’s virtual conference held yesterday (October 13), Razer Fintech’s CEO Lee Li Meng and Razer’s Chief of Staff Patricia Liu, uncovered how the company expanded into fintech without any previous experience or activity in the finance space.
It’s also interesting to note that Razer has also actively pushed the envelope in other ways as it diversifies its product strategy in the areas of tech, gaming, and even cryptocurrency.
How Razer made its foray into fintech
Razer has always been about “for gamers, by gamers”.
The company was founded in 2015 and for a long time, it focused on building hardware for gamers. In recent years (since 2018, to be exact) however, it has moved on to build financial services as well.
This got many questioning as to why they even entered into this space, but it’s actually a natural progression following a shift in the gaming industry.
“In the past, when you play games, you kind of scrimp and save a couple hundred dollars to play a game and when you get sick and tired (of it), you wait for the next edition. Today, games are about free-to-play, they encourage in-game payments, building a virtual identity by buying virtual helmets and whatnot,” said Li Meng.
“We realised that our gamers were looking for ways to actually partake in consumption of online content (like) live streaming and all that. And when we look at the pain points, our users and game partners were looking at the collection of payments, or the accessibility of payments for our gamers.”
This is something that developed countries like Singapore would be quite equipped in, as pretty much everyone has a bank account and credit card, but it was not quite the same for other parts of the world.
Razer observed that in emerging markets, gamers tend to be younger and need alternative methods of payment, which is what prompted them to extend their business into the fintech space.
They started building “a million offline points”, but soon enough, more alternative payments started coming up such as Internet banking and e-wallets.
At the end of the day, the infrastructure behind pulling dollars into the system, was something that I think was fragmented. It was not available to everyone, so we decided to invest.
(We did) what I tend to call “a lot of the plumbing work”, that nobody outside will actually see. We got out to get our license, track record, and built up our merchant base. Today, Razer Gold virtual credits is supported in Southeast Asia with over one million touch points that Razer Fintech has. And then, the rest of the world they have another 4.5 to 4.6 million touch points.
– Lee Li Meng, Razer Fintech CEO
Simply said, Razer moved away from purely gaming and took on this fintech direction because they realised that they needed to help solve a problem for their users.
A look at Razer Fintech’s growth
Razer Fintech is focused on digital payments in Southeast Asia. Last year, it hit US$4.3 billion in transaction volume, and US$3.2 billion for the first half of 2021.
“I think we’ve grown kind of in stealth mode to a certain extent over the last few years, and it’s starting to bear fruit for us.”
Commenting further on Razer Fintech’s growth, Li Meng remarked that when Razer IPO-ed in 2017, their H1 numbers revealed that their business revenue stood at US$100,000.
Last year, Razer Gold and Razer Fintech contributed to US$128 million of the company’s net revenue. This proves that it has become a “very big part” of their business, making up 10 per cent of its global revenue, said Li Meng.
He added that some people have the misconception that with the end of the RazerPay beta, their fintech dreams and ambitions are going to disappear overnight.
The answer is no. As I mentioned, the business has been growing and it has been driving a lot of transactions. The impact of that is actually very minimal to the Group.
If you look at most fintech companies out there, they tend to be very high-burn companies. They’re all focused on chasing one thing, which is purely transaction volumes. If we were going down that same route as everybody out there, Razer as a group couldn’t have gone from a negative US$150 million of net loss three years ago, to a profitable first half of 2021 at US$30+ million.
– Lee Li Meng, Razer Fintech CEO
While others may think that that their fintech dreams have burst and that it’s difficult for them to compete in this space, he assures that they have spent a lot of time to build Razer Fintech and won’t give it up so easily, especially since it has a “semblance of potential (to be a) unicorn within a unicorn”.
Following the discontinuation of RazerPay last September, Li Meng said that they have definitely learnt some business lessons from the experience.
“We always take our profitable core business and try and invest into new businesses. When we embarked on the fintech journey, we wanted to see how we can potentially support. The wallet is just the front-end, the back-end processing is usually done by someone else. We were probably the only ones that did the front-end and back-end.”
When it comes to payment processing, there’s a lot of legwork that goes into it — you not only need to get a payment service provider license, but if you want to do e-wallet, you need to do it in every single country, so scaling takes time, he asserted.
The upside is that they saw a huge demand as their Visa card went viral. Razer fans globally, in the US and Europe, kept asking when they could get their hands on the Razer Card.
“This is something that we know there is going to be response (when we launch). People who are big fans of ours will always come in and support us.”
What I also do realise is that when you have capital to invest at some point in time, you look at something that is doing well. But if the dollar burn here is going to be giving you less ROI than another business which also requires capital, from a business perspective, you then decide (on) capital allocation.
… The conversion of the 150 million users on to Razer Gold, the cost of acquisition is a lot less than trying to be a one-for-all daily use wallet. … It’s about focus for each of the group and driving returns for our shareholders.
– Lee Li Meng, Razer Fintech CEO
Moreover, he noted that when they were test-bedding RazerPay, Razer Gold has grown more globally and faster than Razer Fintech as it continues to see transactions being made hourly or daily by its users.
Think big, start small, act fast
Chiming into the conversation, Patricia remarked that it underscores the philosophy that they have at Razer.
Whatever Razer designs and puts out into the market, they always have the gamers in mind.
We think big, but we start small. From our track record, (you can see that we’ve been making) small inroads into certain sectors and categories. When we did peripherals, people told us that there’s no market for highly-priced premium peripherals, but we proved them wrong. Same thing with our hardware, business laptops, and stuff like that.
We start small, and after that, we act fast. We are very quick to go in, and we scale as needed. But we’re also very quick to say ‘how do we pivot into something else that is actually going to be good for the company’. That’s why we’re able to make that transformation in a very short time — from a negative to a positive — and still preserve the whole bottomline. We may be bigger now, but we are still very startup(-like) in terms of mentality, in adopting, commissioning, and decommissioning whatever projects that we are in.
– Patricia Liu, Razer’s Chief of Staff
One such project that showcased this mentality is its award-winning Project Hazel, which is dubbed the “world’s smartest mask.”
“We literally said, ‘look, Covid-19 is not going to go away anytime soon; the habit of wearing a mask is probably going to be there for quite some time’. How do we pivot and create a product that is not bothersome. It’s cool, it lights up, it’s N95. And straightaway, our engineers got to work,” shared Li Meng.
“We are now in beta-testing (phase) and have sent it out to many of our friends who have given us feedback, and the plan is to hopefully roll this out in Q4 2021.”
Why it’s betting big on sustainability
Building on the idea of always putting users first, it is also the very reason why Razer is betting big on sustainability now.
They realise that users are getting more conscious about sustainability, and would like companies that they are buying from to also do the same.
We are keenly aware that our main market as well as our main supporters are really the youths — the Gen Zs and the millennials — and we are aware of the responsibility. If anything, Razer is very loud and we are loud in everything that we do. We want to make sure that this voice does not go into a void and is actually heard.
Sometimes people scoff at us and think it’s an oxymoron that a gaming company wants to be sustainable. But we believe in the “starfish approach” and will do whatever we need to (add value) to the bigger picture.
– Patricia Liu, Razer’s Chief of Staff
She also stressed that Razer has always been involved in sustainability efforts since day one, except that they used to call it as “eco-friendly” or other terms, long before sustainability became a buzzword.
Now, they have become more intentional with their sustainability efforts, and have even published a manifesto on it.
Li Meng cited an example of how Razer boxes used to “very big” and “very loud” to capture people’s attention. But in the last few years, they have taken the effort to downsize it to minimise shipping space, and made use of recyclable, origami-like packaging that does not use any glue.
Internally, Razer has also banned the use of plastics at its new headquarter, and they’ve also put dollars to their corporate venture arm, zVentures, to support sustainable startups.
The first investment from Razer’s US$50 million Green Fund went to Bambooloo, one of the world’s first plastic-free bamboo toilet paper and home care brands.
Razer has also partnered with Hong Kong-based startup ClearBot to redesign its AI robot that cleans up marine plastics.
Patricia added that literally the entire company is activated to play a part in sustainability.
Razer CEO Tan Min Liang is “personally passionate” in this endeavour, Razer executives have a direct sustainability KPI in different areas that they helm like R&D or logistics, and Razer staffs are given eight hours off to embark on a sustainability project that they are interested in.
Razer’s move into crypto
Besides sustainability, another thing that Razer users are interested in is cryptocurrency, which is why Razer CEO have publicly announced that they are inching towards this space.
“If you look at the whole talk around crypto, blockchain, NFTs, generally, it’s the guys who are very passionate about it. It’s the younger guys who spend a lot of time on the online world, so the gamers right? This is something we know for a long time, and it’s something we will not be able to ignore. Now the question is, how do we make the right entry?” quipped Li Meng.
Since Razer is a listed company, there are certain things that they may, or may not be able to do. This is why they are being “very careful” — they are answerable to their shareholders, but at the same time, they want to look at things that matter.
In line with their crypto ambition, Razer has made several investments in this space, including Southeast Asia-focused crypto exchange Coinomo.
The idea is to better understand how this entire thing work and see if there’s a role for Razer Fintech to help with the processing behind it.
This is a very licensed business. Does my current license allow me to do it? In certain countries which are more supportive, probably yes. Singapore’s payment services have already started allowing people do digital assets. So if I don’t have the license, are there other partners I can work with? There are capabilities that Razer has, that some of these partners don’t have.
So it is an opportunity for us to use the dollars and capital we have on our balance sheet. We raised US$600 million with no debt four years ago, and today, we still sit on US$600 million with no debt. We’ve not fundraised any in the last few years. We have the luxury of having a core business that is growing very strongly with profitability. We’re able to reverse the losses, but still have the flexibility to put capital to learn about new things that our gamers care for.
– Lee Li Meng, Razer Fintech CEO
“We are (still in) early days because it’s not straightforward,” he said conclusively.
He added that Razer is a “high-growth tech company” that has seen 20 to 40 per cent growth year on year. Profitability is on the horizon, and they are actively entering new segments.
Separately, noting that new cryptocurrencies and blockchains require high energy consumption, Patricia assures that whatever fintech strategies that they are exploring next, they will balance it with sustainability.
“It’s two seemly opposing ends, but we will evolve and iterate as we go. … The youth, millennials and Gen Zs are interested in cryptocurrency, so let’s see how we can actually get this whole thing sorted out in a balanced manner and still fulfil our responsibility to be a good role model. This is a tall order, but then again, we are used to a high benchmark.”
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