Hepsipay - introductory comments, a revenue analysis to follow

FinTech arm of Hepsiburada, the leading Turkish ecommerce business

Hepsipay is the FinTech arm of Hepsiburada, the leading Turkish e-commerce platform. The company provides online payment services, which uniquely complement Hepsiburada’s online commerce business. Hepsipay commands a sizable market in Turkish payments: its wallet base stood at circa 9.2 million as at September 2022, up from 8 million as at June 2022. Total payment volume that goes through Hepsipay is at 44% of Hepsiburada’s GMV, as of September versus 39% in June. The BNPL functionality introduced earlier in the year is off to a good start. The customer base with limits issued exceeded 500K by August with over 100K actively using the limits. Enterprises on the Hepsipay platform can scale up their networks outside of Hepsipay payments. Strong trends in Hepsipay are likely to continue with both in terms of wallet base/consumer traction and enterprise acquisitions outlook.

Hepsipay, the corporate. Hepsipay is a wholly owned subsidiary of Hepsiburada, the largest and the fastest growing e-commerce platform in Turkey and the region. The parent company offers over 1.5 million products in more than 30 categories, ranging from mobile phones to cosmetics, from FMCG to fashion. Hepsiburada is the most visited e-commerce platform in Turkey, with over 17 million monthly visitors.

Hepsipay as a digital open wallet. Hepsipay provides payment gateways and online payment services to both consumers and enterprises. Enterprises on Hepsipay that use the payments platform can scale up their businesses outside the payments system. Hepsipay can help streamline the payments and simplify the commerce activity simultaneously providing easy and secure online payment for consumers.

Buy now pay later now in operation. Hepsipay has started offering BNPL functionality for its wallet users. They will be able to buy now any make payments one month after the purchase date. The ‘Buy Now Pay Later’ feature is the first of its kind for any e-commerce business in Turkey. The feature is tailored to customer profiles, shopping habits, needs, and priorities. Hepsipay indeed calculates a ‘Buy Now Pay Later’ limit for each customer. Once the limit is set in the Hepsipay Wallet, customers can use both debit and credit cards and shop within their limits. They can then defer payments by one month. The BNPL feature is first used only for products sold by Hepsiburada, the parent. The feature should naturally include products and services on offer by other merchants in the future.

Opportunities and challenges

Cash versus electronic trade – room for further growth. There is plenty of runway for growth in electronic payments. Electronic payments surpassed cash payments globally only a few years ago. There is scope for continued growth in online commerce for foreseeable future both in and around Turkey.

Preferred partner in Turkish online business. Hepsipay is a preferred partner in the Turkish online space. The company should be able to leverage this into a growing presence in point-of-sale transactions. Hepsipay’s progress to become a payments operator of choice for both enterprises and consumers has indeed allowed the company to build and maintain a competitive position in the Turkish e-commerce market earlier on.

A truly two-sided platform. Hepsipay is not strictly an acquirer. Its model differentiates itself from competitors because of the unique e-commerce position of Hepsiburada. Hepsipay effectively runs a compelling two-sided platform, with strong relationships with both merchants and consumers. This should help Hepsipay maintain its strong foothold in the industry. Having intelligence on both sides of the trades, in addition, gives Hepsipay an edge especially in dealing with fraudulent practices.

Growth potential outside Hepsipay’s home market. Hepsipay is also looking to grow into the markets in countries neighboring Turkey, where either the online payment penetrations are low or attractive complementary business opportunities exist.

Scalable business with strong growth potential to be margin accretive in the years to come. The business has a scalable nature, and the scale is not yet explored. That should allow Hepsipay to improve operating yields over time.

Experienced management team. Hepsipay management of various ranks have the experience and the payments industry know-how. We expect the team to become more visible and produce an outlook statement communicating how they plan to navigate through the ongoing evolution of the electronic payments space.

Cyclical risks and trends post pandemic. The ongoing shift toward electronic payments and the rise of e-commerce has accelerated further during the pandemic years, which boosted Hepsipay’s presence across payments industry. Hepsipay might face some headwinds next year as some of the positives from the pandemic start reversing. We are of the view that the growth in client acquisitions on both sides of the trade should outstrip any shortfall arising from post pandemic surprises.

Disruption risks. This is more secular. The payments systems and processing space is still evolving, and it is not inconceivable that new competitors will emerge with future disruption risks, which could significantly alter the business outlook for payments operators.