As stuck-at-home consumers during the pandemic turned to online gaming and other digital entertainment, Coda Payments’ revenue nearly quadrupled to $310 million in 2021 from $81 million in 2019, while earnings before interest and taxes quadrupled to $43 million in the same period, the filings show.
Its software processes payments for some of the world’s largest sites, including Activision Blizzard, Riot Games, Sea Group’s Garena, Netease, Tencent and Tinder. Coda handles over 1 million transactions a day, and on each one, it takes a 15% cut when users pay for things such as game accessories and top-ups.
Its main competitors are Apple and Google but the company’s competitive edge is that it charges half of what the bigger rivals do for a similar service.
Coda Payments initially targeted e-commerce firms as potential customers when they launched their company 10 years ago. They were inspired by the rapid adoption of M-Pesa in Kenya—a mobile phone money-transfer service launched there in 2007—and hoped to replicate the model first in Indonesia and then across the region’s fragmented e-tail landscape.
The early products from Coda Payments, such as carrier billing (where payments are added to a user’s mobile phone bill) and e-wallets, provided an alternative to using a credit card to make online purchases. In Jakarta, where around 70% of payments were still made in cash, the cofounders had their base of operations. “A sizable portion of first-time online buyers lacked Visa or Mastercard, which at the time were prerequisites for participation in the internet economy.”
They quickly pivoted to online game publishers who had a ready need for their payment software. “If you’re selling a digital product, you obviously cannot use cash on delivery because there’s no physical delivery,” Neil Davidson, cofounder and executive chairman of Coda Payments, says.
Coda Payments initially incorporated its digital payment systems on publishers’ websites, but it soon realised that there was a gap with new mobile game developers, who often release their works as apps. The firm launched Codashop in November 2014, and it now attracts more than 50 million visitors per month from 65 different countries. Codashop sells credits and accessories for both PC-based and mobile games. Game publishers can take more than 300 payment methods on their own websites thanks to its Codapay service.
Consumption of digital media in Southeast Asia—including gaming and video streaming—is projected to triple to $43 billion by 2025 from $14 billion in 2019, according to a study published by Bain, Google and Temasek in October. “Southeast Asia is benefiting from secular trends such as its young population and rising affluence across the region,” says Florian Hoppe, Singapore-based partner at consulting firm Bain & Co.
Given the regulatory burdens, Davidson claims that collecting money on a cross-border basis is a significant obstacle for publishers of digital video games. He continues, “Coda is playing a crucial role in helping digital content providers expand across many jurisdictions by cooperating with locally regulated payment service providers, improving the company’s market share in new areas throughout the world.”