I blogged a year ago about techfin, the incumbents’ view of applying technology to existing banking services, versus fintech, which seeks to transform the financial system. That has become one of the top search terms to find my blog, as it turns out, mainly because my blog entries are the first to be returned when searching for ‘techfin’.
Interestingly, that third one claims that Jack Ma, some guy from China, coined the term first, 10 months after my blog entry. What? And he also gets it wrong:
“Fintech takes the original financial system and improves its technology,” said Ma during Friday’s China Conference organised by the South China Morning Post. “Techfin is to rebuild the system with technology. What we want to do is to solve the problem of a lack of inclusiveness.”
Whatever. It’s semantics and we have so many arguments about terminology, I can’t be bothered. What I will say is that Ant Financial is getting interesting, as it works on spreading wings. First it started to invest in equivalent products and services to its own in other markets of similar nature, such as India and Thailand. That’s why Jack talks about inclusiveness, as that’s a great strategy with a mobile wallet.
Hence, it invested $680m in India’s Paytm in September 2015, just before demonitisation stimulated Indians to open 200 million wallets on Paytm. In November 2016, Ant partnered with Thailand’s Ascend Money, which also runs a digital wallet service. Under the agreement, Ant Financial will assist Ascend Money to grow its online and offline payments and financial services ecosystem. It’s notable that Ascend may be based in Thailand, but also operates in Indonesia, The Philippines, Vietnam, Myanmar and Cambodia.
Last month, it announced a $3bn debt financing deal to expand its investment portfolio and, interestingly, moved into the US markets by acquiring MoneyGram for $880m. This was followed by a strategic investment into Korean messaging service Kakao, which offers Kakao Pay, and just last week an increase in its stake in Paytm, such that Ant Financial is now the majority owner of the service.
Dominant global mobile wallet
Meantime, apart from heading for inclusiveness, Ant has also expanded into the US and Europe, not just through MoneyGram. At the end of 2015, the company signed a deal with Wirecard to give it access to Europe for merchant checkout using its wallet for Chinese tourists. This was followed with a partnership with Ingenico to further enhance its European presence, and then a deal with First Data to give it similar coverage of North America.
The media positions the Wirecard, Ingenico and First Data moves as being a pure provision of service for Chinese tourists. Don’t believe it. This is a fast-moving company that’s expanding nonstop in its mission to be the dominant global mobile wallet.
That is the mission and was articulated by Ant Financial CEO Eric Jing at Davos in January.
“We have an ambition to be a global company,” Jing told CNBC at the World Economic Forum in Davos. “My vision (is) that we want to serve two billion people in the next 10 years by using technology, by working together with partners … to serve those underserved.”
TWO BILLION PEOPLE BY 2025!!
That’s a crazy number of people. How will it do this? By leveraging all of the key technologies of today: cloud, data analytics and distributed ledgers. “All these technologies will be used … to bring more, a high level of security,” Jing explained, adding that artificial intelligence and blockchain will be “deeply” integrated into Ant Financial’s operations.
And just to wrap up, I’ve been blogging about Alipay for a while now (six years) and am hugely impressed at how they think. It’s radically different to US and European fintech firms, because it’s automating a market that had nothing before. When Alipay began, there was no ecommerce in China. Alibaba and Alipay created it.
That’s a radical difference from the American internet giants such as Amazon and eBay, which had major brick and mortar competitors also competing online, and began without any payments integration. Equally, the US giants were serving a developed market where consumers had sophisticated online needs; Alibaba and Alipay were serving markets that were changing dynamically as Chinese citizens moved from rural, agricultural work to the rapidly expanding cities, where manufacturing offered a rapid uplift from poverty to riches.
In creating this revolution of commerce in China, both manufacturing and online, Ant has emerged as the leader, and I’ve recently seen its European leader Rita Liu present at a few conferences. Her first slide has the strapline, ‘Ant Financial – Empowering Digital FinLife Globally’. This is important as it’s not a payments app or a mobile wallet, but a complete social, commercial and financial system in one. Imagine Facebook, Amazon and PayPal all integrated into one app. That’s what Ant has got. Another slide showed that it’s not just for payments either, but covers all the financial products we need.
I love the line at the bottom of this slide: it’s all about deep user understanding, not cross-selling. It’s obviously familiar with how Western banks work. In fact, Rita made the comment on this slide that most of its wealth management is coming from Chinese citizens under 35 years old in areas where there are no banks, as in much of rural China.
Equally, it can scale. For example, on China’s Singles Day last November, Alipay was processing an average 120,000 transactions per second (tps) for a total billing of $17.7bn in the 24-hour period. At some point, it was processing 175,000 tps.
Visa averages 1,750 tps and scales to 24,000 tps; Alipay beats that. So when you think of this company most Americans have never heard of, watch out for it in the next few years, because it’s going to be everywhere.
– This article is reproduced with kind permission. Some minor changes have been made to reflect BankNXT style considerations. Read more here.