Executive Summary
Key insights from Lakala’s strategic moves and market dynamics:
- Lakala faces significant revenue and profit declines in 2025, driven by intense competition and shrinking银行卡支付 (bank card payment)业务.
- Major shareholders, including联想控股 (Legend Holdings) and founder relatives, have reduced stakes, signaling caution over growth prospects.
- The company is pivoting to cross-border payments and stablecoins, leveraging its dual licenses for跨境人民币 (cross-border RMB) and跨境外汇 (cross-border foreign exchange).
- Regulatory fines and compliance issues, such as anti-money laundering violations, pose ongoing risks to profitability and reputation.
- A successful Hong Kong IPO could provide crucial funding for international expansion, but challenges in license acquisition and market penetration remain.
Navigating Turbulent Waters: Lakala’s Domestic Struggles
Lakala, once a dominant force in China’s digital payment landscape, is confronting a perfect storm of operational and financial headwinds. The company’s decision to pursue a Hong Kong IPO comes at a critical juncture, as it seeks to offset domestic declines with ambitious international growth. Lakala’s Hong Kong IPO represents a strategic pivot that could redefine its future, but the path is fraught with challenges from regulatory scrutiny to shareholder skepticism. For global investors monitoring Chinese equity markets, this move underscores the broader shifts in the digital payment sector, where adaptability and innovation are paramount.
Financial Performance Under Pressure
Lakala’s recent financial reports reveal a troubling trend of contraction. In 2024, the company reported total revenue of 57.62 billion RMB, a decline of 2.98% year-over-year, while net profit attributable to shareholders plummeted by 23.26% to 3.51 billion RMB. The first half of 2025 exacerbated these issues, with total revenue dropping 11.12% to 26.52 billion RMB and net profit falling 25.44% to 2.29 billion RMB. Key financial metrics highlight the strain:
- Operating cash flow net amount decreased by 79.02% in H1 2025, signaling liquidity constraints.
- Short-term borrowings surged by 101.79%, raising concerns over debt management.
- Asset-liability ratio climbed to 69.50%, reflecting increased financial leverage.
These figures illustrate how Lakala’s core银行卡支付 (bank card payment) business is eroding, with transaction values down 13.62% in 2024 and revenue from this segment falling 16.89% in 2025. The company’s reliance on traditional payment models has left it vulnerable to market disruptions, making Lakala’s Hong Kong IPO a potential lifeline for reinvention.
Shareholder Exodus and Market Sentiment
Investor confidence has waned, as evidenced by significant stake reductions from key shareholders. In May 2025,孙浩然 (Sun Haoran), the brother of founder孙陶然 (Sun Taoran) and former third-largest shareholder, divested 19.27 million shares, cashing out approximately 493 million RMB. This was followed by联想控股 (Legend Holdings), the largest shareholder, announcing plans to reduce its stake by up to 3% in July 2025. If fully executed, Legend’s holding would drop from 26.54% to around 23.5%, intensifying market apprehensions about Lakala’s growth trajectory. These actions suggest that even insiders are questioning the company’s ability to navigate current challenges, casting a shadow over Lakala’s Hong Kong IPO narrative.
Competitive Pressures in China’s Digital Payment Arena
China’s digital payment market is dominated by tech giants支付宝 (Alipay) and微信支付 (WeChat Pay), which collectively control over 90% of the consumer segment. Lakala, with only 18 million active individual users—less than 1/50th of Alipay’s base—has struggled to compete. The shift to mobile-centric支付+生态 (payment + ecosystem) models has marginalized traditional players like Lakala, which relied heavily on银行卡收单 (bank card acquiring) services. This competitive disparity is not merely a result of technological lag but also strategic missteps in adapting to evolving consumer preferences.
The Rise of Mobile Payment Titans
支付宝 (Alipay) and微信支付 (WeChat Pay) capitalized on ecosystem integration to expand beyond mere transactions. For instance, Alipay’s early innovation in simplifying payments with six-digit passwords and WeChat Pay’s viral growth through red packet campaigns during the 2014 Lunar New Year revolutionized user adoption. By 2016, the introduction of收钱码 (money collection codes) with zero fees dismantled barriers for small merchants, eroding Lakala’s value proposition. Lakala’s failure to innovate in areas like扫码支付 (scan-to-pay) and system stability further alienated users, as evidenced by frequent POS terminal failures and limited functionality. This erosion was gradual but decisive, forcing Lakala to retreat from the C2C market by 2018, where its share had dwindled to under 2%.
Implications for Business-to-Business Services
While Lakala retains a foothold in the B2B sector, providing digital solutions for金融机构 (financial institutions) and enterprises, its offerings lack the depth of rivals.支付宝 (Alipay) and微信支付 (WeChat Pay) have extended into digital marketing, supply chain finance, and data analytics, creating sticky customer relationships. Lakala’s narrower focus on收单 (acquiring) services leaves it exposed to margin compression and client attrition. As one industry expert noted, ‘Payment providers must evolve into holistic solution partners to survive.’ For Lakala, this means that even its B2B stronghold is under threat, amplifying the urgency behind Lakala’s Hong Kong IPO and cross-border ambitions.
Regulatory Hurdles and Compliance Costs
China’s regulatory framework for digital payments has tightened, emphasizing反洗钱 (anti-money laundering),数据安全 (data security), and跨境合规 (cross-border compliance). Lakala has faced repeated penalties for non-compliance, including a 2024 fine of nearly 8 million RMB for issues like merchant verification and fund settlement failures. In 2025, additional fines were levied for MCC code manipulation, reflecting heightened scrutiny under the ‘一机一码’ (one machine, one code) policy. These regulations have eliminated previous套利 (arbitrage) opportunities, directly impacting Lakala’s profitability.
Legal and Reputational Risks
Beyond payment infractions, Lakala is entangled in controversies over暴力催收 (violent debt collection) practices. Complaints on platforms like黑猫投诉 (Hei Mao Tou Su) exceed 100,000, detailing instances of harassment and unethical recovery tactics. This aligns with broader industry crackdowns, such as the 2024 joint notice from公安部 (Ministry of Public Security) and中国人民银行 (People’s Bank of China) to standardize collection behaviors. Such reputational damage not only incurs regulatory costs but also deters partnership opportunities, complicating Lakala’s Hong Kong IPO prospects. As one compliance officer stated, ‘Trust is currency in payments; once lost, it’s hard to regain.’
Strategic Shift: Cross-Border and Stablecoin Initiatives
In response to domestic pressures, Lakala is aggressively pursuing international growth through its cross-border payment network and stablecoin capabilities. The global cross-border payment market, valued at 2125.5 billion USD in 2024 and projected to exceed 3200 billion USD by 2030, offers substantial expansion potential. Lakala’s dual licenses for跨境人民币 (cross-border RMB) and跨境外汇 (cross-border foreign exchange) enable it to process transactions in 37 currencies across 100+ countries. However, with only six international payment licenses, the company’s global footprint remains limited, posing a hurdle to scaling operations.
Leveraging Hong Kong’s Financial Ecosystem
Hong Kong’s status as an international金融中心 (financial center) provides Lakala with access to mature capital markets and favorable regulatory environments, such as the 2025稳定币条例 (Stablecoin Ordinance). Lakala’s Hong Kong subsidiary holds an MSO license, positioning it to capitalize on stablecoin-based跨境结算 (cross-border settlement) demand. By listing on the港交所 (Hong Kong Stock Exchange), Lakala aims to secure funding for technology upgrades and market entry, potentially transforming its business model. As the CEO of a rival firm observed, ‘Hong Kong IPOs can unlock value, but execution is key.’ For Lakala, this means that Lakala’s Hong Kong IPO must deliver tangible results to justify investor confidence.
Challenges in International Expansion
Despite its ambitions, Lakala faces intense competition from global players like PayPal and local incumbents in target markets. The company’s reliance on organic growth, coupled with regulatory heterogeneity across jurisdictions, could slow its cross-border momentum. Moreover, the stablecoin sector, while promising, is still nascent and subject to volatile regulatory shifts. Lakala’s success will depend on its ability to forge strategic alliances and adapt to local norms, a complex endeavor that requires substantial capital—precisely what Lakala’s Hong Kong IPO is intended to provide.
Investment Outlook and Forward Guidance
Lakala’s journey underscores the transformative potential of strategic pivots in volatile markets. The company’s focus on cross-border payments and stablecoins aligns with global trends toward digital currency adoption and seamless international transactions. However, investors should weigh the opportunities against persistent risks, including regulatory overhead, competitive intensity, and execution uncertainties. Lakala’s Hong Kong IPO could serve as a catalyst for renewal, but it is not a panacea for deeper structural issues.
For stakeholders, the imperative is to monitor Lakala’s progress in leveraging Hong Kong’s advantages to drive sustainable growth. Diversification into high-margin services and technological innovation will be critical to long-term viability. As the digital payment landscape evolves, Lakala’s ability to integrate its cross-border and stablecoin initiatives into a cohesive strategy will determine whether this gamble pays off. Investors are advised to review upcoming IPO disclosures and regulatory filings for deeper insights into Lakala’s operational turnaround.