Oct 26, 2016
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Alipay Expanding Its Reach Beyond China

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Alipay is following its Chinese customers travelling abroad by increasing its footprint outside the mainland. The Chinese payment giant has recently entered into partnerships with Verifone Systems, Inc. (PAY) and First Data Corporation (FDC) to expand its mobile payment app service outside of its home market.
Alipay’s partnership with First Data will help its Chinese consumers to pay by Alipay at select retail locations in California and New York from the beginning of November by using First Data’s Clover Mini point-of-sale solution system. Its other tie-up with Verifone will enable retailers in North America and Europe to accept Alipay through Verifone e355 mPOS solution. They would even be able to attract customers and drive sales through Alipay’s in-app marketing campaigns, especially considering that the holiday season is approaching.
Earlier in August, Alipay and InterContinental Hotels Group signed a global partnership which offers Chinese guests at the chain’s hotels, the option..

Alipay is following its Chinese customers travelling abroad by increasing its footprint outside the mainland. The Chinese payment giant has recently entered into partnerships with Verifone Systems, Inc. (PAY) and First Data Corporation (FDC) to expand its mobile payment app service outside of its home market.

Alipay’s partnership with First Data will help its Chinese consumers to pay by Alipay at select retail locations in California and New York from the beginning of November by using First Data’s Clover Mini point-of-sale solution system. Its other tie-up with Verifone will enable retailers in North America and Europe to accept Alipay through Verifone e355 mPOS solution. They would even be able to attract customers and drive sales through Alipay’s in-app marketing campaigns, especially considering that the holiday season is approaching.

Earlier in August, Alipay and InterContinental Hotels Group signed a global partnership which offers Chinese guests at the chain’s hotels, the option to pay via Alipay through all of IHG’s online and mobile channels across all its properties globally.

With such strategic partnerships, Alipay is looking to tap Chinese consumers during overseas travels. Alipay which is often dubbed as PayPal of China aims to serve 2 billion customers globally in the next 10 years.

China’s Outbound Tourist Boom

In recent years, China has been the fastest growing source market and Chinese people are the world’s top spender in international tourism as per a report by United Nations World Tourism Organization (UNWTO). In 2015, China along with the United States and the United Kingdom led outbound tourism; spending by Chinese travelers reached $292 billion during 2015, growing at the rate of 26% while the number of travelers rose by 10% to 128 million as compare to 2014.

Overseas travel by people of China has risen exponentially over the past two decades and it is driven mainly by an easing of restrictions on foreign travel, rising disposable incomes, and better travel facilities, among other factors. The report points out that China currently generates some 13% of global tourism receipts. During 2016, there has been a slight dip in foreign travels undertaken by Chinese, given the weakness in its currency. However, the long-term outlook remains steady.

Goldman Sachs’ November 2015 report highlights the fact that China’s outbound tourism is set to boom over the next 10 years. It reads, “Fueled by experience-hungry millennials and a growing middle class, the number of Chinese passport holders is forecast to swell by 100 million over the decade.” This number is 1.5 times of all U.S. outbound tourists in 2015.

Going forward, while Hong Kong and Macau will continue to remain in focus, there would be a dramatic increase in Chinese traveling to destinations such as Europe and other countries in Asia.

Awaited IPO?

With more than 450 million active users, Alipay is already the world’s largest third-party platform. Alipay is a dominant player in the Chinese third-party mobile payments market with almost 70% share, it is followed by Tenpay at around 21%.

Alipay is operated by Ant Financial Services Group which was spun-off from Alibaba (BABA) in 2011, although long-term commercial operations continue. Ant Financial which comprises of Alipay, Alipay Wallet, Yu’e Bao, Zhao Cai Bao, Ant Credit and MYbank, which is controlled by Alibaba’s Founder Jack Ma.

In April this year, Ant Financial Services Group raised $4.5 billion funding which is said to be the biggest private fundraising by an internet company globally; prominent names such as China Investment Corporation Capital and CCB Trust are among its investors. With this round, Ant Financial broke its previous record of $3.3 billion fund raising in 2015. Broader estimates suggest that the round of fundraising valued Ant Financial at $60 billion which is makes it the most valuable private technology company overtaking popular companies such as Uber, Xiaomi and Airbnb.

Final Word

The shareholding structure shows that Alibaba Group has a 33% right to equity stake in Ant Financial Group which would translate into approximately $20 billion on current valuation. Successful rounds of fundraising and completion of three years as a profitable company have been heating up speculations about its Initial Public Offer (IPO). However, it seems that investors warming up for its IPO will have to be patient as the company is focusing on its growth plans as of now.

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