The decision to consolidate these operations coincides with Rakuten’s unveiling its financial performance for the second quarter.
Rakuten Group, a prominent player in the Japanese e-commerce sector, has unveiled its plan to bring together its payment and point businesses under Rakuten Card, its established credit card arm. The strategic move aims to improve the company’s financial capabilities and lay the groundwork for future possibilities, including listing its credit card division.
The company is currently struggling to maintain its operations despite posting substantial revenue from its core e-commerce operations. Rakuten’s financial woes have been attributed to its investments in its mobile phone venture, which struggled to gain traction in the competitive Japanese market. Since then, the company has encountered financial challenges for twelve consecutive quarters.
Rakuten’s Strategy to Enhance Capital Generation
In its pursuit of generating capital, the Japanese e-commerce conglomerate has been exploring the possibility of listing various business units, with its popular internet banking subsidiary, Rakuten Bank, being one of them. The company is taking proactive steps to streamline its financial operations by consolidating payments and points under Rakuten Card. This integration is anticipated to happen on November 1 to reinforce Rakuten’s market standing and create opportunities for strategic collaborations, ultimately contributing to the company’s efforts to overcome financial obstacles and reinvigorate its business outlook.
“At the Board of Directors meeting today, Rakuten Group, Inc. decided that with an effective date of November 1, 2023, Rakuten Pay (online payments) business and Rakuten Point (online) business will undergo a company split, and our consolidated subsidiary Rakuten Payment, Inc., the company said.
The soon-to-be-consolidated points and payment business lies at the heart of the company’s offerings. The units are designed to provide customers with a wide array of offerings. Users can earn points through Rakuten credit card transactions, shopping, and insurance services. In return, the points can be used for purchasing groceries, settling bills, or booking travel.
Rakuten Announces Q2 2023 Financial Performance
The decision to consolidate these operations coincides with Rakuten’s unveiling its financial performance for the second quarter. The company demonstrated significant economic improvement. According to the announcement, the Japanese e-commerce giant achieved its highest-ever consolidated revenue for the quarter, reaching 497.2 billion yen – a remarkable YoY growth of 9.7%.
Non-GAAP operating losses for Q2 FY2023 stood at 39.4 billion yen, indicating a substantial improvement of 41.0 billion yen YoY. The financial gains stemmed from prudent cost management, optimized roaming expenses, and the maturation of Rakuten Mobile’s base station network. The consolidated non-GAAP EBITDA turned profitable, recording 33.6 billion yen, marking robust growth of 50.3 billion yen YoY.
Aside from the financial earnings report, Rakuten recently announced the departure of Tareq Amin, who had led its mobile business unit as CEO since March 2022. Amin’s exit from the firm underscores Rakuten’s ongoing challenges in establishing a solid footing in the dynamic mobile sector.