The Digital Wallets Game: The Cold War Between West and East

Hello, Habr! The confrontation between the largest technology companies in the West and the East is growing every year. The fintech sector is no exception, where the payment giants share the market, including PayPal, Apple Pay, Alipay, Samsung Pay and Paytm. In order to learn more about this emerging innovative competitive environment, we at PayOnline , a company specializing in the automation of online payment acceptance, decided to translate material on the alignment of these technological forces.

By the end of 2016, the number of mobile phone users will exceed 4.8 billion people. The growth of mobile wallets will also accelerate. Against this background, the following situation is developing in Asia: on the one hand, the popularity of smartphones is growing faster than in any other region of the world, on the other hand, financial services are practically not widespread in most Asian countries. The coincidence of these two factors creates excellent opportunities for fintech companies. Comparing Western and Eastern players, we can say that the former are more famous, go one step ahead in the field of innovation and are rapidly expanding their business, including in the Asian region. Their eastern “pursuers” provide the best local adaptation of their solutions, are very popular in their native countries,

American digital financial solutions have long been right to compare with banks. As of the end of March, 148 million PayPal customers held more than $ 13 billion in their accounts. If we compare the figure with bank deposits, then PayPal in this indicator will only slightly lag behind TD Bank or Capital One . Starbucks does not have an account opening service, and yet 12 million members of the network loyalty program have downloaded over $ 1.2 billion into their accounts in the mobile application. This is more than the amounts held in accounts at First Commonwealth Financial Corp. and Charles Schwab .

PayPal and its subsidiary services Venmo and Braintree showed excellent financial results in 2015, ahead of eBay in terms of capitalization. The first quarter of 2016 also showed the validity of dividing companies into two separate businesses. PayPal does not intend to become a bank in the traditional sense of the word, but the success of new products, such as lending to merchants and the general popularity of the online shopping service, indicate that the company now provides almost the entire range of basic financial services.

The largest e-wallet operators are mainly engaged in expanding their geographical presence, rather than the product line. So, having launched its services in the market of South Korea (5 million consumers) and the United States, Samsung Pay added Spain and Australia to this list. Apple Pay, whose customer base is replenished weekly with 1 million new users, previously available in 6 countries (USA, UK, Canada, Australia, China, Singapore) this summer expanded its presence by launching operations in Switzerland, France and Hong Kong. As for Android Pay, in addition to the US and UK markets, where one and a half million new users join it monthly, at the end of last month the service became available in Singapore and Australia.

A serious threat to these expansion is posed by mobile phone manufacturers, in particular, Chinese players such as Xiaomi and Huawei, who have joined this race. In addition to developing its own digital wallet, Xiaomi invested $ 115 million in the acquisition of a 29.5% stake in Sichuan Hope Bank, which plans to serve millennials, as well as small and medium businesses. Unexpected news was also the announcement of cooperation between potential competitors in the payment segment Samsung and AliPay.

Of all the e-wallet markets, the fastest growth is observed in China and India - countries with a high level of penetration of smartphones and a large number of customers who do not have access to banking services. The main problem of the solutions developed in these countries is their low popularity outside the countries and poor scalability. However, in addition to great prospects, these markets also differ in quarterly growth in the level of competition.

During the April private round of financing, AliPay managed to raise a record $ 4.5 billion, raising the company's total market value to $ 60 billion, which is about 10 billion more than PayPal's capitalization. As for the AliPay customer base, the size of which has exceeded the mark of 450 million users, this figure is already twice as high as the PayPal indicator. The loan portfolio of MyBank, a subsidiary of a company specializing in loans for small and medium-sized businesses, is already $ 20 million. The company promises to soon expand the scope of its activities to include insurance and private capital management.

As for the foreign initiatives of the company, here AliPay is faced with new Chinese legislation prohibiting the storage of money in the accounts of payment services from July 1 if their customers do not have a bank card in China. Thus, foreign users will be able to use AliPay services only for making online purchases on the Alibaba group sites.

At the beginning of the year, AliPay completed a deal worth $ 1.28 billion to acquire a controlling stake in Paytm, the largest representative of the Indian e-commerce market. In the near future Paytm plans to launch the country's first payment bank. In the future, in addition to payments and international transfers, the new bank will also provide insurance, private capital management and lending services (in cooperation with other banks, since it does not have permission).

Another Indian digital wallet operator, MobiKwik, has managed to receive financing totaling more than $ 80 million. Now its user base has 30 million retail customers and 75 thousand SMB customers. The company aims to increase these indicators to 150 million and 500 thousand, respectively, with a turnover of $ 5 billion. Recently, MobiKwik launched a campaign to provide an annual interest rate of 6% for the funds that users store on the MobiKwik mobile wallet account. The offer looks very attractive against the background of other interest rates on bank deposits in India, the average size of which is 4%.

Another player, FreeCharge, raised an investment of 113 million last year. A little later, for $ 400 million, it was acquired by the leader of the Indian e-commerce market Snapdeal. Ola, India's largest taxi service, has announced the development of its own digital wallet, OlaMoney. In general, there are at least five popular digital wallets on the market, including a brand like Oxygen.

A new generation of European mobile banks (the so-called “non-banks”, such as Atom , Mondo , Fidor ), which are growing rapidly, can be a useful acquisition for digital wallet operators in Asia who want to compete with PayPal and Apple Pay in terms of product quality expanding functionality and geographical coverage.

In the first half of the year, fintech news aggregators were full of loud headlines. German Number26 with 200,000 customer base raised $ 40 million during Round B. Another German bank, Fidor, with an audience of 300,000 users, continues to grow in the UK, where the popular technology publication Wired has already named it the country's leading online bank. Just a month ago, Fidor was acquired by BPCE, the second largest bank in France .

The British Tandem, Mondo and Loot during their rounds A raised 20 million, 5 million and 1.5 million pounds, respectively. In addition, Mondo and Starlink reported receiving another 15 million and 70 million pounds, respectively. Swedish Tink Gets $ 10 Million in Round B, Starling and Number26received their own banking licenses.

Previously, such fully mobile banks existed only in the United States, and now, thanks to the British regulatory authorities, this area is undergoing a rebirth. Nevertheless, for some reason, we are not observing the followers of this trend in Asia. Is it really a lack of talent? Most Asian markets are characterized by a lack of banking services, that is, the conditions for the emergence of new wave banks have not yet developed. As for the markets with a high level of distribution of banking products and services, such as Singapore, Japan, South Korea, Hong Kong, they are under the strict control of large banks, and local regulators maintain their security and stability, which are more important than any market innovation. It seems that only customers are able to get this situation off the ground. Maybe,

It is also worth noting that 1 million pounds of the amount raised by both Tandem and Mondo falls on crowdfunding campaigns. This is a good trend, because, firstly, it shows the initial demand for the service (and both banks are in beta testing), secondly, it makes it possible to get the first customers from the very beginning, and, thirdly, “one million from customers "sounds more attractive to potential investors than" one million from other investors. " The “crowdfunding” scenario can be very promising for the Asian market: if customers “vote” with their money for the creation of such services, then local regulators will probably not be able to ignore their requirements.

Frankly, there are only a few new generation banks in Asia. Neat mobile bank is available in Hong Kong, Timo and Momo are in Vietnam . The latter raised $ 28 million during round B. However, this does not compare to the Brazilian Nubank, which received a record for both the country and the industry $ 52 million, as a result of which the cost of the startup is now estimated at 500 million.

Goldman Sachs announced the launch of its own digital bank called GS Bank , since then, however, without reporting any good news about the project. Located in Singapore DBS Bankmade a similar statement about a similar project in India. However, the devil, as you know, is in the details: the news sounded good, but let's look at the final result.

Be that as it may, all these solutions are intended only for retail customers, while the idea of ​​a “simplified bank for SMEs” looks much more interesting. Earlier this year, Spanish financial group BBVA, which bought the American neo-bank Simple and invested in the British Atom, also acquired Holvi, a Finnish online business bank providing services in Finland, Austria and Germany. A similar bank called Anna will soon be launched in the UK. It is interesting when such solutions get to Asia, the majority of whose population is somehow connected with small or medium-sized businesses, and the boundaries between retail customers and micro and small businesses are blurred.

Continue to follow the updates of the blog of the processing company PayOnline and stay up to date with the news of the most modern world fintech projects.