Core Insights - PayPal China released a report on small and medium-sized enterprises (SMEs) in cross-border e-commerce, indicating strong growth despite a complex international trade environment, with 67% of enterprises having annual revenues below $3 million, highlighting the dominance of SMEs in the sector [2] Group 1: Growth Opportunities - Shenzhen SMEs demonstrate remarkable innovation capabilities, with examples of businesses leveraging unique products to attract significant overseas interest [3] - Emerging business models, such as interest-based e-commerce, are showing substantial growth potential, with Shenzhen companies having a clear advantage in these new fields [4] - The report highlights a rapid increase in digital product transactions, alongside traditional sectors like consumer electronics and furniture [4] Group 2: Payment Localization Challenges - Localized payment requirements are critical for successful transactions, with specific needs varying by country, such as local tax invoices in Mexico and "buy now, pay later" options in Brazil [5] - PayPal offers a comprehensive payment solution that allows Chinese merchants to accept payments in over 200 countries, addressing local payment preferences and facilitating quick currency conversion [5][6] Group 3: Fast Settlement Solutions - PayPal's four-hour RMB withdrawal service is a leading cross-border settlement solution, enabling quick fund recovery for SMEs, which is crucial in the current trade environment [6] - The service supports multi-currency transactions and ensures rapid access to funds, enhancing cash flow for small businesses [6] Group 4: Diversification Strategies - In response to US-China trade tensions, successful companies exhibit traits such as multi-market presence, product differentiation, and digital empowerment [8] - Chinese enterprises are expanding into emerging markets in Europe and Latin America, with localized adaptations being essential for success [8] - A Shenzhen home goods company has successfully shifted focus from the US market to multiple European countries, increasing its European business share to 35% through PayPal's localized payment solutions [8] Group 5: Technology Empowerment - Shenzhen companies utilizing digital tools have an average order conversion rate 18 percentage points higher than traditional firms, with AI tools expected to reduce operational costs by 30% [8] - The digitalization of global trade necessitates inclusive global collaboration platforms, with PayPal's innovative payment solutions providing crucial support for SMEs venturing abroad [8]

Financial Data and Key Metrics Changes - Total revenue decreased by 21% from RMB3.9 billion in 2023 to RMB3.1 billion in 2024 due to a volatile macroeconomic environment and phasing out less profitable projects [27] - Gross profit slightly declined by 1.3% to RMB728 million, but overall gross profit margin increased by 4.7 percentage points from 18.7% in 2023 to 23.6% in 2024 [28] - Adjusted EBITDA exceeded RMB100 million with net profit growing over sixfold year over year to RMB73 million compared to 2023 [30] Business Line Data and Key Metrics Changes - The annual gross margin of One Stop payment increased by 4.5 percentage points from 9.7% in 2023 to 14.2% in 2024, reaching 21.6% in the second half of 2024 [29] - Revenue and profit per merchant served in the in-store e-commerce business doubled year over year in 2024, with upfront fees contributing around 50% of revenue in this segment [21][9] - The position marketing business achieved a record high in business transaction amount in 2024, with marketing transaction volume hitting a record high [8][19] Market Data and Key Metrics Changes - Overseas gross payment volume (GPV) grew five times year over year, with significant expansion in Japan, Singapore, and Hong Kong [11][17] - QR code payments accounted for about 80% of total payment volume, indicating a strong preference for mobile payment methods [36] - The penetration of QR code payments in other Asian markets is still at an early stage, providing opportunities for growth [55] Company Strategy and Development Direction - The company aims to strengthen cohesiveness along the value chain and increase commercialization of business segments, focusing on high-quality and profitable customers [6][10] - Emphasis on leveraging AI to enhance quality, risk management, and operational efficiency, with a commitment to continuous innovation [8][25] - The strategy includes expanding into more regions in Asia and enhancing partnerships with global banks to provide more product offerings [11][18] Management Comments on Operating Environment and Future Outlook - Management expressed optimism about consumer spending trends and government policies enhancing consumer sentiment [35] - The company is focused on maximizing profit delivery to stakeholders rather than just revenue, with a gross profit take rate increasing by over 10% year to date [36] - The long-term growth opportunities in overseas markets and AI products are seen as key drivers for future profitability [72] Other Important Information - The company significantly reduced investment in direct sales teams and instead developed distribution channels, leading to improved sales efficiency [20] - AI applications have contributed to a 20% reduction in operating expenses, enhancing overall cost efficiency [25] - The company has built a customized one-stop solution for cross-selling payments, merchant solutions, and in-store services [6] Q&A Session Summary Question: Can management provide more color about the app-based payments and traditional payment of total payment volume in 2024? - Management noted that QR code payments account for about 80% of total payment volume, with a focus on maximizing gross profit levels rather than just revenue [36] Question: Should we expect AI to be earnings accretive or dilutive? - Management indicated that AI is viewed as a mid to long-term opportunity, with investments being made prudently to ensure profitability is in sight [40] Question: What is the competition landscape for QR code payments in China and the Asian market? - Management highlighted that the QR code payment market is growing and dominated by a few key players, with a focus on service excellence and product customization to maintain market share [49][50]