2012: A Year of Expansion for La Ka La, One of the Earliest Payments Startups in China

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2012 was a year of expansion and spending for La Ka La, one of the first independent payments solutions in China: headcount increased five fold, from one thousand to five thousand. The company, breaking even one year earlier though, reportedly had a net loss of 100 million yuan in 2012 as a result of expansion and a sign that competition in the payments sector intensified.

Founded in 2004, La Ka La started out as a service, powered by China UnionPay, for consumers to pay utility bills or make payments thus to receive transaction commissions from either side of payments. POS terminals were introduced in 2006 to convenience stores to simplify its services. In 2010, La Ka La came up with a modified POS terminal to help small businesses to receive payments directly, in addition to existing payments services.

By the end of 2012, sixty thousand convenience stores, including well-known brands such as 7-11, in more than three hundred cities had been equipped with La Ka La’s terminals, and about three thousand employees in over one hundred cities are serving small businesses with its innovative POS terminals. The total transactions reached 600 billion yuan, daily peak transactions were one million, and 100 thousand POS terminals were in use.

img:lakala.com

Testing the Water of Mobile Payments 

Inspired by the mobile payments trend, La Ka La launched a Square clone in May 2012. The gadget, however, is not targeting at small businesses, but for personal use – for users to pay off credit cards or make payments with their mobile phones. By November 2012, the shipment of the gadget was over one million and the software installations reached five million.

The mobile app extended its services to car rental, movie & show tickets, lottery tickets, etc. not long after its launch. La Ka La hand-picked the initial merchant partners, but plans to open the platform to all businesses, offering payments support — hopefully taking commissions as well.

It sounds like that it has evolved, with a different starting line though, to be something very similar to services like Alipay’s mobile app. To be competitive, Sun Taoran, CEO of La Ka La, knows a thing or two, “what is coming is the mobile Internet era that everyone will own a smart phone. For a service aimed at consumers, it’s critical for an app to have a place on the landing screen of their phones.”

As an early entrant, La Ka La has become sort of a conventional company in payments sector. Unlike other app developers who only have to deal with code lines, La Ka La has to maintain all the devices in convenience stores and feed a big team of customer service staff in the over one hundred cities, both of which are cost burdens. For instance, the company needs to spend about 200 million yuan into renewing all existing devices for Chinese banks are changing bank card forms. And this can happen again since La Ka La transactions are through the UnionPay, a  national bankcard association joined by almost all Chinese banks, rather than a self-developed payments solution like Alipay.