Since this year's “Report on the Work of the Government” listed “vigorously promoting the construction of a modern industrial system and accelerating the development of new quality productivity” as a priority in 2024, a series of deployments have been carried out one after another. Earlier, on March 15, Zhu Hexin, Party Secretary and Director of the State Administration of Foreign Exchange, presided over a party group (enlarged) meeting. The conference emphasized that with a focus on speeding up the development of new types of productivity, the focus is on serving science and technology innovation enterprises and micro, small and medium-sized enterprises, and continuously improving the level of facilitation of cross-border trade and investment and financing.

In this context, as an important component of the new quality of productivity, cross-border payments play a critical role, and have become an important force in promoting smooth trade and promoting international and domestic dual cycles.

On March 20, the cross-border payment institution LianLian Digital (2598.HK) launched a stock offering, becoming one of the first companies among the cross-border payment platforms to advance the listing process.

According to the prospectus, the company plans to sell 55.92 million shares globally, of which 5.592 million shares will be sold in Hong Kong and 50.328 million shares will be offered internationally. The offering date is from March 20 to March 25, with a maximum sale price of HK$10.95, with 500 shares per lot. It is expected that H shares will be traded on the Stock Exchange at 9:00 a.m. on March 28, 2024.

In the industry, even numbers can seize opportunities, and there must be a unique “new” and “quality” undertone behind it, which is worth discussing in depth.

1. Anchor a high growth track and benefit from new forms and policies of foreign trade

It is undeniable that as a cross-border payment company providing comprehensive payment solutions on a global scale, Lianlian Digital has benefited from the rapid development of China's cross-border e-commerce market, and the company is on a high growth track.

Earlier, data released by the Ministry of Commerce on March 5 showed that in 2023, China's cross-border e-commerce imports and exports amounted to 2.38 trillion yuan, of which exports amounted to 1.83 trillion yuan, an increase of 19.6% over the previous year. It is worth noting that new forms of foreign trade, such as cross-border live streaming and delivery, are booming. Furthermore, according to data released by China's Ministry of Commerce at the end of January this year, there are currently 645,000 enterprises with foreign trade import and export performance across the country, including more than 100,000 cross-border e-commerce entities.

In fact, in addition to facing rapid growth in consumer demand in mature markets such as Europe and the US, China's cross-border e-commerce industry is also currently actively targeting rapidly emerging consumer markets such as Southeast Asia, South America, and the Middle East. This is also becoming an important future growth point for China's foreign trade e-commerce sector.

As can be seen, a series of factors, such as current new business formats such as cross-border live streaming and the rise of emerging market regions, have injected new vitality into cross-border trade, and the continued growth of this market has also provided huge development opportunities for the field of cross-border payments.

At the policy level, at present, China is also continuing to promote cross-border trade and investment facilitation, strengthen and improve the supply of foreign exchange facilitation policies for cross-border trade, support more banks and payment institutions to carry out settlement services in new trade formats such as cross-border e-commerce, and expand the cross-border financing facilitation policy to the whole country.

Predictably, with the rapid growth of China's cross-border trade and the continuous emergence of new business formats, as well as continued support for cross-border trade and cross-border payments at the policy level, cross-border payment institutions represented by connected numbers are expected to usher in more development opportunities.

2. Performance continues to accelerate, and all major business segments go hand in hand

In fact, Lianlian Digital has shown a trend of continuous acceleration in terms of performance, and has become an important potential catalyst for the future after this successful listing.

First, from the perspective of revenue growth, the numbers have continued to grow rapidly.

According to the prospectus, from 2020 to 2023, consecutive digital revenue was 589 million yuan, 644 million yuan, 743 million yuan and 1,028 million yuan, respectively. Looking at the external macro environment, it is not difficult to find a trend of continuous healthy development of the company's business.

(Data source: prospectus)

At the same time, the connected digital business has three main components: digital payment services, value-added services, and others. Among them, digital payment services are the largest business. Looking at 2023, the company's major business segments have gone hand in hand, laying a solid foundation for the company's further business growth in the future.

Among them, global payment service revenue increased 37.1% year over year to 656 million yuan, which mainly benefited from the increase in the number of global payment service customers, especially the growth of cross-border enterprises. Domestic payment service revenue increased 44.1% year over year to 218 million yuan, mainly driven by the increase in domestic payment service transaction amount. Revenue from value-added services increased 46.7% year over year to 134 million yuan, mainly due to the rapid expansion of the company's commercial services (including digital marketing services). The company's continued high growth in different business areas has fully verified its competitive advantage and development potential in the cross-border payment industry.

(Source: Company Prospectus)

Furthermore, Lianlian Digital continues to maintain strong R&D investment. In 2023, the company's R&D expenses increased 27.5% year-on-year to 268 million yuan. This shows that the company continues to focus on technological innovation and product development, and is also expected to provide stronger support for future business development.

Finally, judging from the performance of other related companies in the industry, the performance of companies involved in arranging cross-border payments has also shown a high growth trend in recent years. The high growth of these companies is mainly due to the increase in overseas business revenue brought about by expanding cross-border business, which also shows the huge development potential of the cross-border payment industry.

In summary, the continuous increase in revenue scale, diversified development of business segments, and continued investment in innovative R&D all provide strong support for the sustainable development of a continuous digital future.

3. The barriers to competition are deep, and the successful listing further strengthens the moat

This time, Lianlian Digital's successful preemptive listing not only strengthened its competitive barriers, but also provided a more stable foundation for its future development.

This is reflected in the following aspects:

First, LianLianDigital has deep competitive barriers in the field of cross-border payments. One of them is the advantage of license plates.

According to the prospectus, by the end of 2023, Lianlian Digital had obtained 64 payment licenses worldwide. These licenses, combined with cooperation with business partners, have enabled Lianlian to build a global payment service network covering 100 countries and regions, supporting transactions using more than 130 currencies. This extensive global business layout and license coverage provides it with a unique competitive advantage and forms a solid moat. With the success of the listing, the company will also gain convenience in market access and license acquisition, further consolidating the advantages of existing licenses.

Second, the company has deep accumulation and accumulation of capital, technology, resources, etc., and a successful listing will further strengthen its leading position in the industry.

In the field of cross-border payments, the key to core competitiveness is how to efficiently meet the comprehensive needs of cross-border merchants. As a cross-border payment institution with a global license layout, proprietary technology platform and extensive partner network, Lianlian Digital has served a total of 3.2 million merchants and enterprises from various industries such as e-commerce, service, and manufacturing. The company has a deep accumulation of capital, technology and resources. At the same time, it is also consolidating its leading position in the industry by continuously improving its scientific and technological capabilities and strengthening its overseas layout.

In particular, the listed fund-raising company plans to expand business operations globally, strengthen overseas layout, expand into markets such as Southeast Asia, the Middle East, and South America, and apply for more licenses. All of these measures are expected to further strengthen the company's competitiveness in the global cross-border payments market.

Finally, the successful listing of Lianyan Digital will not only support market expansion. At the same time, as a pioneer in listing in the field of cross-border payments, the company's brand reputation and recognition within the industry will also be comprehensively enhanced. Using the listing platform, the company is expected to further expand its influence and market share, and lay a solid foundation for long-term sustainable growth.

4. Conclusion

With the deepening degree of global economic integration and the continuous development of cross-border trade, the cross-border payment industry is ushering in more room for development and greater market opportunities.

In recent years, a number of cross-border payment institutions have also embarked on the path of seeking listing. A very important logic behind this also sees the potential for continued growth in the cross-border e-commerce industry and favorable support from continuous policy support.

Although the domestic payment industry is booming, it must be acknowledged that at the international level, there is still a lack of a cross-border financial payment network that can provide more complete services for domestic importers and exporters. At the same time, there are many challenges and uncertainties in the entire market. For example, the diversity and changes in international payment rules, increased security risks for cross-border payments, and adjustments in regulatory policies have all put a lot of pressure and challenge on cross-border payment companies.

Even as far as digital is concerned, the company continues to strengthen technological innovation, improve service levels, actively expand the international market, and continuously improve the cross-border payment network to meet growing customer needs. The company's long-proven market entry ability, license acquisition ability, and steady business growth strength in the international market have all provided solid support for it to continue to maintain its leading position in the industry, and its performance after listing will also be exciting.