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DT, March 2017

How Ant Financial Is Laying the Foundation for Alipay’s Expansion
March 1, 2017

Ever since Ant Financial Services Group let it be known in October that it is working with key payments players like VeriFone Systems Inc. and First Data Corp. to bring its Alipay mobile-payments service to North America, the industry has wondered about the Chinese company’s strategy both in the United States and globally.

Late in January, the answer began to unfold with Ant’s announcement that it is buying MoneyGram International Inc. for $880 million, a 20% premium on the Dallas-based company’s volume-weighted average share price.

Absorbing the United States’ second-largest money transmitter brings a key asset to Ant and Alipay at a critical time. When the deal closes in the second half of the year, it will link MoneyGram to 450 million Alipay users in the Asia-Pacific region, plus another 180 million customers in India who use Paytm, a service with which Ant has a partnership agreement. On its own, MoneyGram accesses 2.4 billion bank and mobile accounts globally.

“As we look at financial inclusion, what we look at is remittances,” says Souheil Badran, Alipay’s general manager for North America. “It’s done on a daily basis, and it’s financial services for the many, not the few.”

Moreover, MoneyGram complements the reach of Ant and Alipay. “They’re in countries we’re not in today,” Badran says. For Alipay, MoneyGram widens the choice of funding sources for users seeking to pay bills or send money to other holders of the wallet, he adds.

The competitive dominoes are already falling. Last month, PayPal Holdings Inc. responded to the Ant-MoneyGram announcement with a deal to acquire TIO Networks Corp., a cloud-based bill-pay processor based in Canada. Two years ago, PayPal bought Xoom, an online remittance service.

But Alipay has also been busy laying the groundwork in other ways in the North American market for its home users. It’s acutely aware that between 3 million and 4 million Chinese visit North America annually, a number Badran says is growing 20% each year. The deals with VeriFone and First Data, including First Data’s Clover mobile POS unit, are expected to lay down a base of point-of-sale devices that will process the Alipay wallet’s quick-response codes.

Meanwhile, a less-celebrated Ant acquisition, that of EyeVerify, a Kansas City, Kan.-based developer of software for mobile devices that can match the blood vessels in users’ eyes with stored prints, undergirds Alipay’s security thrust.

Alipay has been recruiting strategically important merchants like airport shops, airlines, spas, restaurants, and luxury-goods sellers. It has also made acceptance deals with firms like Uber and Airbnb, which its users are likely to patronize while visiting. “We have started to think about the Chinese consumer so he can use the app” in the U.S., says Badran.

A similar approach is developing for Alipay in Europe, relying on a relationship with terminal maker Ingenico Group, Badran adds.

As for competing with U.S.-based wallets like Android Pay, Apple Pay, or Samsung Pay for North American users, Badran, who came to Alipay in 2016 after spending years at First Data, Digital River Inc., and edo Interactive, says the idea “has definitely crossed our minds,” but he adds “for now we have no immediate plans.”

Instead, he has been busy absorbing the implications of deals like the one for MoneyGram, as well as grappling with merchant and technology partnerships. “I feel like we’ve learned a lot over the last 60 days,” he said last month.

—John Stewart

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