Ant Financial as one of the favorites of the global race of mobile payments

In April 2016, during a round of financing, the market capitalization of Ant Financial, a subsidiary of Alibaba group, increased to $ 60 billion. At the end of 2016, according to estimates by the Hong Kong-based investment company CLSA, this figure grew to 75 billion. For comparison, the capitalization of American Express is the same $ 75 billion, Discover - 26 billion, Mastercard - 121 billion, PayPal - 53 billion, and Visa - 221 billion

Lucy Peng, one of the founders of Alibaba, once said: "The strength of the small in a single movement towards a common goal." This statement is a good description of the strategy that Ant Financial is now following in order to grow and expand its business globally.

Alibaba and Ant Financial Approach

1. Find several emerging markets with relatively underdeveloped online payments and a financial services system.
2. Take a benchmark for the bulk of consumers of these markets who own mobile phones who are interested in using online transactions to receive financial services.
3. Invest in the leading players of these markets engaged in the field of mobile payments and commerce, or immediately acquire them.
4. Add to this the ability of Chinese consumers to shop around the world with the most familiar payment credentials - Alipay.

This is the essence of Ant Financial's approach to the global mobile payment market.

In 2015, Alibaba and Ant invested $ 680 million in Paytm , an Indian payment company , increasing its stake in it to 40%. Last month, they made another $ 177 million cash infusion into the company, bringing the share of Chinese shareholders to 50%. It is also known that last week Alibaba's largest shareholder , Softbank , was considering investing $ 1 billion in Paytm, which, according to some sources, could allow the creation of a new subsidiary under the Paytm brand. The audience of the Indian platform today is 200 million users, and in December, the company's vice president saidthat more than 7 million transactions go through Paytm every day, which is more than the total number of all debit and credit daily operations of the country. In the light of these data, experts believe that such a large Softbank investment in Paytm could reduce regulators' concerns about China's increased intervention in the Indian market.

The Indian story is becoming even more interesting due to rumors that some of Softbank's investment could be used to finance the acquisition of Paytm, a major Indian online marketplace Snapdeal , which, according to some sources, is also considering the possibility of a similar transaction with Flipkart . In 2015, Alibaba, Softbank and Foxconn invested $ 500 million in Snapdeal.

In 2016, Ant invested in Ascend Money, a Thai business group . Ascend's digital payment technology is used in the online markets of Thailand, Vietnam, Cambodia, the Philippines, and Myanmar. The amount of the transaction was not disclosed.

In February this year, Ant Financial made another transaction (the amount of which was not disclosed), which allowed it to become a full-fledged minority shareholder of Gcash , the leader in the Philippines mobile payments market with a base of 3 million users. Like Alipay, Gcash offers its users a range of services - payments, direct payments, payment of bills, online shopping. The owner of the service, Mynt, in turn, provides loans to individuals and merchants.

Also in February, Ant invested $ 200 million in the South Korean mobile payment service Kakao Pay , installed on 95% of all smartphones in the country. Its user base totals 48 million people. This investment is connected with Kakao’s plans to expand its portfolio of financial services and find new customers among offline merchants.

In early April, Ant acquired helloPay , the operator of Southeast Asia’s largest mobile payment network, and immediately rebranded all the names, replacing them with AliPay Singapore, Alipay Malaysia, Alipay Indonesia, and Alipay Philippines. Before the deal, helloPay was the most popular payment method on the Lazada market .- The largest e-commerce platform in Southeast Asia, serving 8 million users in the region, the total number of consumers of which is 600 million people.

Last week, Lazada hit the headlines for a different reason after announcing a partnership with Netflix and Uber to compete with Amazon, which recently entered the Philippine market. Netflix Broadcast and Uber VIP Services are now available as part of other Lazada electronic platform offerings. Last year, Alibaba invested $ 1 billion in the company to improve logistics and operational efficiency - a measure designed to positively affect the company's competitiveness in the region.

In August 2016, Alipay and Ant entered into an agreement with Ingenico, which makes it possible to conduct offline payments for merchants serving 10 million Chinese tourists visiting Europe. According to Ingenico, the addition of Alipay support to its payment gateway allowed merchants to easily connect a payment service in POS terminals.

In October 2016, Verifone and Alipay announced a similar deal, simplifying the mechanisms for integrating Alipay into payment terminals of all 150 countries served by Verifone, including the United States.

Separately, it should be noted that Alipay also actively concludes deals with merchants aimed at satisfying the shopping habits of Chinese consumers: accepting payments in extremely popularChinese travelers have duty-free shops at airports, as well as a number of sites for booking accommodation and travel.

All these actions are closely related to the launch of the proprietary ePass system announced in 2015, which has greatly simplified the possibility for merchants to add Alipay as a payment method.

If Ant manages to win a bid for the right to acquire MoneyGramthen she will get access to the MoneyGram consumer base, its digital assets, an international network of 350 thousand physical agents and 2 billion bank accounts, which the American company uses to send transfers and store funds. The transaction was approved by the Board of MoneyGram, however, for its completion, the parties have yet to obtain permission from the Foreign Investments Committee and the US Department of Justice.

Be that as it may, there is a strong feeling that such activities of the Alibaba subsidiary are aimed at organizing a unified international network of mobile financial services aimed at serving residents of countries with a high access threshold to traditional banking products. Those same 2.5 billion people for the sake of working with which card systems are transforming their assets and infrastructure. This is how Lucy Peng described the company's plans during her December visit to Silicon Valley, saying that Africa and Latin America are the next in the list of markets that the company is seriously considering entering.

If everything previously done by the company is just a prologue, it means that soon we will receive news about new partnership deals or acquisitions of existing players in these regions that can provide the Chinese financial group with access to its customers.

What will happen next?

In the old days, when Alipay was still just a payment method inside Alibaba, serving Chinese consumers who came to the online market for shopping companies, the struggle for customers took place at a different level - inside China, for the right to be accepted among local merchants. Global card networks could participate in Alipay only if they could manage to put their cards in the wallets of Chinese consumers. However, until recently, they were virtually excluded from competition in the Chinese market.

Banks could issue cards only within the framework of the state-owned Union Pay payment network. Some Chinese consumers had MasterCard and Visa cards, but they could only use them outside of China, and not domestically. Theoretically, barriers to working on the market were removed as a result of a WTO decree adopted two years ago, but international card networks still do not have a work permit. Once they receive it, they will have to go a long way from issuing new cards by local banks to distributing them and using them by Chinese consumers.

This means that, most likely, international card networks should not expect a large increase in their share in the processing of Chinese transactions, including even though their cards are now available in Alipay wallets.

All this indicates that in the next few years, the markets of all developing countries, where all international networks have been striving to get to, will become the global game field. And of course, we will see more and more attempts to invent a way to “get” mobile payment systems in such markets.

How it happened in India with its major local player Paytm.

You can’t catch a fish from a pond without labor

Ant billion-dollar investments outside of China could help the company overtake global card networks by creating a single international network of mobile financial services that allows consumers to pay merchants, and merchants accept this payment, without the need to issue branded cards or buy POS-terminals. Such an approach will also open up for local players interested in access to all the services that Ant Financial offers Chinese consumers today - lending, banking and investing. The network will be supported by 450 million Chinese users who have become its customers due to China’s closeness.

However, all this does not mean that Ant will succeed easily.

First of all, one should not forget that in China there are many other players with similar ambitions, but who have not gained the same success outside their domestic market. For example, Xiaomi, Tencent and Baidu, or others that previously received Alibaba-sponsored businesses, ShopRunner and the 11 Main electronic market, which closed a year after launch.

The largest and most successful Chinese companies are state owned and managed, which makes the state their largest shareholder. This kind of control opens up unlimited access to capital and the financing mechanism, which, on the one hand, feeds their growth, and on the other hand, holds back internal competitors at a certain level. However, an advantage within China does not necessarily flow into one beyond.

According toInterbrand research , consumers living outside of China are still skeptical of Chinese brands that have a reputation for being cheap in manufacturing and sometimes dangerous, low-quality products. It is generally accepted that Chinese companies lack a strategic understanding of the needs and desires of consumers from other countries.

And it seems that the desire to avoid these errors is one of Ant Financial's priorities.

Alibaba's IPO gave the company funds to invest outside of China, and their financial statements allow them to get even more loans to implement their plans. IPO Ant planned this year will add even more money to the piggy bank.

To avoid the "made in China" syndrome, Ant decided to act by acquiring its native brands in the target countries. This will provide the company with access to a reputation and established relationships with customers, which it can effectively use and take to a new level.

Before making a deal with Paytm, Ant first of all considered the possibility of opening its own company in the country, later, however, abandoning this idea. This is one of the reasons why the deal with MoneyGram now looks even more attractive in the eyes of the company. MoneyGram will give her a global asset and a brand recognized around the world that can be used, including for other purposes. If the deal goes through, Ant is unlikely to rebrand MoneyGram, and if that happens, then certainly not right away.

However, the success of Ant, and with it the ability of the company to operate globally, will also seriously depend on another very important point: the economic viability of the emerging markets it will enter and how quickly these countries will be able to generate there was a significant transaction volume.

In this regard, India is a good indicator of the effectiveness of Ant Financial's efforts to create a global network of mobile payments and financial services - a market where, thanks to the demonetization carried out last November at the initiative of the Prime Minister, the emergence of a mobile payment system is taking place right now and in real time economics of financial services.

India in the spotlight

Paytm and Ant Financial are making serious bets on the Indian market. However, the same can be said of card networks that have funded and launched a QR code-compatible solution, BharatQR, that simplifies accepting payments from offline merchants and direct transfers between cardholders RuPay, MasterCard, Visa and American Express.

As soon as a consumer downloads a mobile banking application, he has the opportunity to make a payment by scanning QR codes in the merchant’s store. Funds are transferred from the consumer’s bank account to the merchant’s account without the need to use a terminal to accept cards and generally without the use of plastic cards as such. Fourteen banks are already working on enabling BharatQR support, and many of their other sector colleagues are about to join the pioneers over the next few months.

At the same time, Paytm is injecting millions into its own QR-code system, compatible with BharatQR. According to company representatives, its QR code platform will soon reachlevel of 1 million merchants participating and the company has already hired 10 thousand "field agents" to attract offline merchants. It seems that this Paytm strategy is aimed at attracting merchants, and above all those, most of whose buyers are actively using Paytm services and have corresponding accounts in the system.

Obviously, the stakes for global networks in this game are high, and their life would be much easier if there were no Paytm plans and their solid financial support from Ant Financial / Alibaba.

They are also high for others who wish to break into the higher echelon at any cost.

New Ant Eric Jing November 2016 chief saidthat in the next 10 years, his company will create an open ecosystem aimed at providing financial services for more than two billion users.

As events unfold in India, it will be very interesting to see which partnerships are born on this basis and under what circumstances this will happen. And can there be a place in this “open ecosystem” for card networks whose account details can be stored in Alipay / Paytm wallets as well. What about PayPal? Or Amazon, which, according to some reports, invests about a billion dollars annually in order to become the leading online marketplace in India? And besides, there is Facebook, its Messenger and various commercial opportunities, both companies are working on their implementation.

In addition to the opportunity to watch how a mobile payment system is created and grows from scratch in this country, we are likely to have a good view of the global battle of giants both in India and other world markets.