International

Alipay Takes On The World – At Top Speed

            Just what makes that little old ant/Think he’ll move that rubber tree plant/Anyone knows an ant, can’t/Move a rubber tree plant”
                                                                                       · Sammy Cahn, (Famously Sang By Frank Sinatra)

So once upon a time there was a little old ant — but it didn’t want to move a rubber tree plant, it wanted to move the entire digital payments ecosystem on a global level. And while you might think that is quite a bit of a bigger job than moving a single rubber tree plant — and something no ant on Earth could reasonably hope to do — well, as Old Blue Eyes reminds us, everyone also says that an ant can’t move a rubber tree plant either.

Luckily, the ant doesn’t know that. No, that ant has high hopes. High apple pie in the sky hopes. And — in the case of the ant we are talking about, Ant Financial — it also has some pretty sweet numbers to back it up.

Ant Financial, the Chinese conglomerate formerly known as Alipay, boasts 400 million registered users, 270 active monthly users and 100 million active daily users. Alipay processes 175 million transactions per day, and 60 percent of all Alipay transactions happen via mobile device.

Depending on which figures one likes, Alipay’s share of the Chinese mobile payments market is ~64 percent of China’s, according to Chinese research firm Analysis. And, given that China is far and away the largest mobile payment market in the world, it’s not an inconsiderable market to own the majority of. As of 2017, China is expected to process $3.29 trillion in mobile payments — as of 2020 that figure is expected to have nearly doubled to $6.31 trillion.

It’s not a disadvantageous position to be in — but Alipay, and its parent company Ant Financial, are clearly ready for more. After all, why be the biggest mobile payments player in China (again, no small accomplishment as the scoreboard so far makes clear) when one can race to be the biggest mobile payments player on the planet.

That effort is most publicly denoted by Ant’s widely anticipated — if still largely mysterious — IPO theoretically slated for a dual listing on the mainland China/ Hong Kong stock exchange sometime 2017. The when of that IPO is up in the air — most reports are betting late 2017, though there are still those who think it might happen in the first half of the year.

But while the when remains up in the air, the efforts Ant has made in the last year to step up the level of its global game are more or less undeniable. The year 2016 saw partnership agreements with European and North American processors, a memorandum of understanding inked to begin offering payments in Australia, and the purchase of U.S.-based EyeVerify, a mobile eye recognition tech firm that operates stateside.

But 2017 has seen the expansion efforts accelerate into hyper-drive.

The biggest — and arguably most surprising — piece of news was the announcement that Ant Financial is paying $880 million to buy MoneyGram, a 12 percent premium to MoneyGram’s trading price at the close of business the day the deal was announced.(Jan. 24).

The transaction itself handed Ant Financial some giant inroads into the United States, and around the world. MoneyGram has 350,000 physical locations across 200 nations via banks and retail outlets to allow for individual remittances within countries and across borders. And direct access to 2 billion DDA accounts, worldwide.

And the action was just warming up.

The MoneyGram partnership announcement was followed quickly with a $200 million investment into a FinTech project belonging to Kakao, the $5 billion firm that runs Korea’s dominant messaging service.

The deal will allow Ant to proffer financial services through Kakao Pay in Korea.

Which represents more big access for Ant — KakaoTalk has 48 million users and its software installed on 95 percent of the smartphones in Korea. The firm decided last month to split its financial services into a new company, which will allow for such services as over-counter payments, peer-to-peer transactions, bill payment and web banking — to start.

Eventually, Kakao would also like to offer a full menu of financial services, including loans and financing. Enter Ant — which has done for Alipay in China everything Kakao hopes to do with Kakao Pay in Korea. For its altruism, Ant Financial and Alibaba gain more potential customers for their eCommerce business in Korea as well as giving Chinese nationals an option to use Alipay when they are visiting Korea.

And wait — there’s more. Ant has also recently invested in Ascend Money (Thailand) and Mynt (Philippines), and it holds an equity stake in Paytm (India) and M-Daq (Singapore).

And that’s just the global footprint – there’s also the money.

The Quest For Another $3 Billion

Taking over the world is not inexpensive work — and thus, Ant is currently rumored to be looking to raise as much as $3 billion in debt.

Debt issuing is essentially borrowing money and differs from equity financing in that investors do not get an equity stake in the company. The money is being raised in dollars rather than renminbi so it can fund the $880 million purchase of U.S. payments firm MoneyGram, as well as other international companies.

“It is market practice for a globalized company like Ant Financial to raise debt in USD,” a spokesperson told CNBC, without confirming the amount being raised.

The activity is still in the discussion stages, and thus far there has been no official confirmation from Ant, which raised $4.5 billion in its last funding round.

These funds, according to many unnamed sources, will allow for an international acquisition spree — of which MoneyGram was just the start.

Alipay Global

Among Alipay new North American playmates is Citcon, an integrated mobile payment and marketing platform that connects global merchants with Chinese travelers. As a result of the partnership, millions of merchants in North America will be able to accept Alipay.

Citcon will provide smart mobile point of sale (mPOS), easy-to-integrate API and software products with the goal of making Alipay payment easily accessible both offline and online in the U.S.

“We benefit from Citcon’s deep understanding of [the] Chinese outbound tourism market, extensive experience and deep expertise in the U.S. payment system, which give our customers a seamless payment experience when traveling abroad,” Souheil Badran, president of Alipay North America.

Citcon — in a conversation with payments after the pair-up was announced — noted that signing on with Alipay is a chance to be in on the ground floor of digital payments future — a future that they anticipate Alipay will have a big part in writing.

The question is, can Ant Financial and Alipay export their nation of domination outside of China’s borders? After all, the rules in the rest of the world are quite different than mainland China — and it’s hard to imagine that PayPal, and every other mobile player on the planet, won’t give them a heck of a fight for that finish.

But Ant Financial is clearly in the game, with a will to win. As for why they’re worth keeping an eye on, Frank Sinatra may have said it best.

Just remember that ant …Oops there goes another rubber tree plant.

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Latest Insights: 

The Which Apps Do They Want Study analyzes survey data collected from 1,045 American consumers to learn how they use merchant apps to enhance in-store shopping experiences, and their interest in downloading more in the future. Our research covered consumers’ usage of in-app features like loyalty and rewards offerings and in-store navigation, helping to assess how merchants can design apps to distinguish themselves from competitors.

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