Alibaba (BABA) And The Global Payments Landscape

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Whatever the reason may be – a whopping valuation, speculations on its initial public offerings, global expansion, active userbase or strong revenue, Ant Financial (originally Alipay) is always in news. Here’s a look at how Alipay is emerging on the global payments landscape.

Alipay, Ant Financial and Alibaba are interwoven together. Ant Financial, officially founded in October 2014 originated from Alipay which was founded in 2004. Today, Ant Financial comprises of Alipay, Ant Fortune, Zhima Credit, MYbank and Ant Financial Cloud.

Alipay was spun-off from Alibaba (BABA) in 2011, although long-term commercial operations continued and finally in fiscal year 2018, Alibaba took a 33% equity stake in Ant Financial to strengthen its strategic relationship pursuant to a series of agreements reached with Ant Financial in 2014. The move is concurring with Alibaba’s advancement towards New Retail strategy and international expansion. Ant Financial is committed to develop advanced technologies such as blockchain, Artificial Intelligence, security, IoT and computing capabilities. 

Numbers say a lot. Alipay, along with its partners across locations served approximately 870 million annual active users worldwide and over 15 million small businesses in China alone, as on March 31, 2018. Alipay is a dominant player in the Chinese third-party mobile payments market with a more than 50% share. Alipay is the payments powerhouse supporting Alibaba’s ecosystem.

Ant Financial completed its Series C equity funding raising, amounting to approximately $14 billion in 2018 to accelerate globalization and technology innovation. “Funds raised will be used to accelerate Alipay’s globalization plans and invest in developing technology to further enhance the Company’s ability to deliver inclusive financial services to unbanked and underbanked consumers and small enterprises globally” as per the statement by Ant Financial.

Prominent names such as GIC, Khazanah Nasional Berhad, Warburg Pincus, Canada Pension Plan Investment Board, Silver Lake, Temasek, and General Atlantic participated in the round. Ant had raised $4.5 billion in 2016 and around $3.3 billion in 2015. Ant Financial is counted among leading financial institutions with a valuation of approximately $150 billion.

Ant Financial has been actively expanding its global partnerships. In 2015, Alibaba Group and Ant Financial together first entered into a strategic investment in India with Paytm. In 2017, additional investment increased the stake to around 60% from the earlier 42%. India is a burgeoning digital payments market. It is estimated that the Indian market will grow to $1 trillion by 2023 led by growth in mobile payments, presenting huge business opportunities for players in the digital space while the mobile payments are slated to rise to $190 billion by 2023.

Ant Financial redefined cross-border remittance by launching the world’s first e-wallet cross-border remittance service in Hong Kong based on blockchain technology. The service enables users of AlipayHK to send remittances to GCash of the Philippines using the blockchain technology. Ant Financial filed the largest number of blockchain patents in the world in 2017.

In 2017, Ant Financial invested $200 million in Kakao Pay, Kakao’s new fintech subsidiary, to strategically broaden its digital financial services for local consumers in South Korea.

Ant Financial took its partnership with Globe Telecom and Ayala further by investing in Mynt, Globe’s fintech subsidiary in Philippines. In September 2018, InComm Japan was added to the list of payment processing partners for Alipay; InComm Japan is a subsidiary of the world’s largest POSA card distribution company headquartered in the U.S.

Ant Financial is looking to collaborate with Japanese partners to push cashless payments for rising number of Chinese tourists coming to Japan, especially with the Tokyo Olympic Games scheduled in 2020. Ant Financial in collaboration with Singapore Tourism board and number of Singaporean businesses including Resorts World Sentosa, Shangri-La Hotel, and Singapore Airlines has “conclusion of the first cashless trip made by Chinese visitors to Singapore” using just Alipay.

China’s outbound tourism is thriving. Chinese people are counted among the world’s top spender in international tourism as per United Nations World Tourism Organization (UNWTO); Chinese tourists spent $258 billion on international tourism in 2017 which is almost one-fifth of the world’s total tourism spending during the year. A survey by Nielsen reveals that the proportion of Chinese tourists who use mobile payment platforms is far greater than that of non-Chinese tourists. As per the survey, 65% of Chinese tourists paid for their expenses via mobile payment vis-à-vis a mere 11% of their non-Chinese doing so.

The strong outbound tourism combined with the ‘habit’ of using mobile for payments is a perfect fit for Alipay. While the partnerships with local players is an easier way to get involved in the local markets and tap the local customers, it at the same time supports use of Alipay’s by Chinese tourists worldwide.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Referenced Symbols: BABA

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