KKR wades into South-east Asia's e-payments battle

Hong Kong

KKR is taking sides in South-east Asia's tech battle. The US buyout giant is investing in a leading Filipino payments startup, Voyager Innovations, alongside internet giant Tencent.

Backed by PLDT, Voyager provides digital and financial services to millions of Filipinos through its e-wallet, digital payments and remittance units. KKR and Tencent will turn into minority shareholders in Voyager Innovations Inc by separately acquiring a total of up to US$175 million worth of new shares. The deal is the largest investment to date in a Philippine technology company, said PLDT, which will retain a majority stake in Voyager. Voyager's main rival, though, is backed by Ant Financial, the financial services affiliate of Alibaba. China's Internet behemoths and Japan's SoftBank have been burning cash in a war of attrition to win users in this fast-growing region. KKR could get caught in the crossfire.

It's easy to see the appeal of mobile money here: more than half of South-east Asia's population does not have a bank account, but three-quarters own a smartphone. Loss-making Voyager, owned by local telecoms giant PLDT, ticks some boxes, with prepaid wallets, digital payments for retailers and money transfers.

Certainly both of the heavyweights leading the roughly US$175 million investment announced on Friday have experience to bring to bear. Tencent owns Tenpay, whose clout in Greater China should help Voyager tap cash remittances from Philippines' overseas workers, which hit US$28 billion last year. KKR's experience with US payments firm First Data should help too.

Plus both are backers of Go-Jek, an Indonesian ride-hailing company with a substantial payments arm.

Unfortunately for all parties, Mynt, Voyager's main rival, has a deep-pocketed backer with similar clout: US$150 billion Ant Financial, which has been active across the region, boosted by Alibaba's Lazada.

That means there are two reasons for concern here for KKR.

One is the cost of what may follow - a painful market-share grab that erodes already paper-thin margins in payments, at a time when there is uncertainty around expansion into more profitable financial services. And this is before local banks really get stuck in themselves. Then, there is the issue of bedfellows: coming in alongside Tencent could restrict future deals with its mainland rival on this battlefield, even if KKR has worked with Alibaba in China.

The biggest winner may yet be local telecoms giant PLDT, which owns the majority of Voyager. Its mobile business has lagged rival Globe and a prospect of a new, third, rival to shake up the underperforming sector is looming. A cash boost to digital payments, then, is more than welcome. REUTERS