Ant Financial is expanding rapidly outside of its home market, mainly to serve legions of big-spending Chinese tourists already familiar with its platform. A key question is whether the company, which is valued at more than Goldman Sachs and Morgan Stanley combined, will pursue Western consumers as well.


Ant Financial runs Alipay, which says it has 520 million users. (To put that into perspective, PayPal has 267 million (pdf) active accounts.) Alipay’s most recent deal outside of its home market is with Barclaycard, which processes almost half of Britain’s debit and credit card transactions. The agreement lets UK merchants accept Alipay smartphone transactions without having to replace their payment equipment. Ant Financial is an affiliate of the Alibaba e-commerce conglomerate.


On their own, Chinese tourists are an enormous market: they spent $258 billion in 2017, almost double that of second-ranked US holiday-goers. Alipay is available in 54 markets, and is a partner with the likes of India’s Paytm (Ant also has a stake in the fast growing payment service). Observers have long seen Alipay’s Chinese tourist strategy as a “spearhead” to one day go after non-Chinese customers.



Recently, Ant’s prospects for global expansion have become much more complicated. The US and China are locked in a trade war, and American officials have been warning allies about what they say are security risks of using equipment made by Chinese telecom group Huawei.


Ant has been under far less scrutiny than Huawei, which was founded by a former military engineer. Even so, the US blocked Ant’s acquisition of payment-transfer company MoneyGram in January 2018, citing national security concerns. Britain has been more open minded—earlier this year, Ant purchased UK payments group WorldFirst (paywall) in a deal reportedly worth around $700 million, making it the company’s biggest push yet into western markets. WorldFirst shuttered its US operations, apparently to avoid US interference in the deal.


Ant CEO Eric Jing says the company got its name because ants are small and its service was for the “little guys.” These days, though, the company is a behemoth. It raised almost as much money last year as all EU and US fintech firms combined, giving it a $150 billion valuation, the most in the world for a technology startup. While best known for Alipay, Ant also offers a credit rating system and a giant money market fund. After social-media apps, Alipay is the most-used app in the world.


Chinese regulators have taken note of Ant’s fast growth and potentially systemically important size. As scrutiny grows, the company has shifted its focus from offering its own financial products to running a technology platform for other financial companies. Its tech is plugged into more than 200 institutions, including banks, wealth managers, brokerages, and insurers.


Financial executives in New York and London have mixed opinions about Ant and Alipay. Some think the Chinese company’s QR-code smartphone wallets could one day compete with old fashioned payment cards in the west. Others think behaviors are slow to change and that contactless card payments are already entrenched.


A year ago, BlackRock co-founder Robert Kapito said he was “shocked” (paywall) by Ant’s valuation (higher than that of BlockRock, the world’s biggest asset manager), and worried its rise was a sign of tech disruption coming for incumbent financial companies. The trade war and tighter regulatory scrutiny have altered the playing field for Ant, but execs around the world are keeping a close watch on the Chinese company’s western ambitions.



The future of finance on Quartz



  • Bans on cashless stores could backfire. When it comes to protecting cash, research suggests that making it easier to access notes and coins is better than outlawing cashless stores.

  • The UK is embroiled in the worst political crisis for a generation. Surprisingly, London Stock Exchange Group is the best-performing European financial stock since the Brexit vote in mid-2016.

  • Nigerian retail-lending startup Paylater plans to become a full service digital bank. A cofounder says the fintech firm expects 75% growth within nine months.

  • The SEC isn’t sure whether crypto tokens are securities or some sort of newfangled commodity. But ether investors, hoping the tokens won’t fall under strict US securities regulation, should put their champagne back on ice.

  • Meet Brian Thompson, one of the designers of the $100 note. In 2013, he became the first African-American person to design an American banknote, with features meant to be impossible for North Korea to counterfeit.



Heard on headphones


“China is running basically a $240 billion tourism deficit. As in, China is spending that much more money on outbound tourism than foreign visitors are spending on tourism. That’s a huge change from just a decade ago. If you go back to 2008, the year Beijing hosted the summer Olympics, at that point China had a narrow surplus in terms of tourism.”—Money Talks from Economist Radio.



The future of finance elsewhere



  • Goldman Sachs has extended a $100 million credit line to a Mexico City fintech lender. Such startups are trying to make a dent in Mexico, where lending to the private sector lags (paywall) behind many other emerging and developed economies. PayPal, meanwhile, is investing $750 million in MercadoLibre, a Latin America eCommerce company.

  • North Korea could be running one of the world’s biggest cryptocurrency portfolios. Some experts think the hermit state has amassed some $670 million worth of bitcoin and other digital tokens.

  • A subway operator in China is testing facial recognition software, using 5G technology. The experiment in Shenzhen could make forgetting subway cards—and anonymity—a thing of the past.

  • UK watchdogs have placed peer-to-peer lender Lendy (paywall) on a special watchlist. Regulators, the company, and creditors are trying to collect on its overdue loans.

  • Stash rolled out a payment rewards program to provide customers with fractional shares of stock instead of points.



Previously, in Future of Finance Friday


March 8: Could personal loans from fintech firms give credit cards a run for their money?


March 1: Fintech firms like SoFi and Robinhood offer “free” stock trading. What’s the catch?


Feb. 22: How a three-year-old banking startup has pulled off a perfect lending record




Full article