Almost four years ago, Eric Jing, then Managing Director of Ant Group, made globalization a core mission, moving to Davos to define a vision for building a global customer base of 2 billion people. in a decade.
Since then, the fintech arm of Jack Ma’s Chinese internet giant, Alibaba, has struggled to achieve its international ambitions, with investments weakening in markets from the UK to India and South Asia. -East. Foreign operations still represent less than 5 percent of Ant’s revenue.
The company hopes its successful IPO slated for this month can get it back on track, with 10% of the more than $ 30 billion it wants to raise earmarked for its international expansion.
But like many leading Chinese companies that have established themselves in a large domestic market devoid of international competitors, it faces the challenge of replicating its success abroad.
“Although Ant is hugely successful in China, the importance of international expansion is real,” said Howard Yu, professor at IMD Business School in Switzerland and Singapore. “Relying on a single market for growth always carries risks.”
The group, born from Alibaba’s ubiquitous mobile payments platform, Alipay, dominates online finance in mainland China and made a net profit of 18 billion rmb ($ 2.7 billion) last year. over 120.6 billion rmb.
Getting foreign merchants to accept Alipay was the first step in its global strategy, according to a person familiar with the company’s international operations. A growing number of Chinese tourists venturing abroad helped Ant manage RMB 622 billion in international payments last year.
Then come investments and partnerships in foreign markets. According to Capital IQ, Ant now has 20 such agreements with companies ranging from e-wallets to insurance providers and business process contractors.
Finally, Ant operates the international e-commerce businesses of Alibaba, Lazada, and AliExpress, which encourage customers to use Alipay, the person said.
In China, the rise of Alipay has accompanied that of Alibaba, whose 742 million online shoppers must use it to pay for their goods. But Alibaba doesn’t have the same stranglehold on online shopping around the world, said Ke Yan, analyst at DZT Research in Singapore. “Internationally, Ant does not have the first-mover advantage.”
Ant has sought to reach the hundreds of millions of underbanked people in South and Southeast Asia by taking minority stakes in 10 e-wallet companies, sharing its expertise and technology with its local partners.
“Ant’s mission is financial inclusion and empowering as many people as possible to access what they offer,” said Jan Sodprasert, a Bangkok-based McKinsey partner specializing in digital financial services.
A fintech consultant, who asked not to be named because of a business relationship with the group outside of China, said Ant’s problem was a tendency to “drop the air” among Chinese executives.
“Even in Southeast Asia, Ant is viewed as a very Chinese company. To better understand, they need to build a stronger local team. . . because you are competing against some incredibly strong local players. “
China’s growing suspicion has limited Ant’s options. According to Peng T Ong, founder of Southeast Asian venture capital fund Monk’s Hill Ventures, it must have been much more “arm’s length.” The question, he said, was “how good they are as investors rather than as operators”.
Two of Ant’s biggest international bets face challenges. Since 2015, it has invested 2.9 billion rmb in India Paytm, creating a 30% stake. Once the South Asian country’s largest payments provider, it lost market share and last year reported a net loss that exceeded its total revenue, which was down 6% from 2018.
It’s a similar picture to WorldFirst, the UK payments group Ant bought in February 2019 for $ 700 million in its biggest expansion into Western markets. Under Ant’s ownership last year, the company’s losses also exceeded revenue, according to Ant’s IPO filings.
Shane Chesson, a founding partner of Southeast Asian venture capital fund Open Space Ventures, said that while Ant was busy adding partners, not all of them turned out to be market leaders.
In Indonesia, the world’s fourth most populous country, Ant-backed e-wallet platform Dana has been sidelined by local rivals.
“These JVs have ownership complexities. . . it remains to be seen whether Ant can weave that network or whether larger mergers and acquisitions and more patience are needed, ”said Mr. Chesson.
Mr. Yu said offering his technology to other companies may be the best way for Ant to grow and expand overseas quickly.
This strategy has worked well for its peers, including insurance group PingAn, whose OneConnect fintech business has grown rapidly outside of China by sharing its financial technology with both businesses and regulators.
Some of Ant’s partners are already paying to use its services. For example, Singapore’s currency exchange platform M-Daq, in which Ant has a large minority stake, paid him Rmb 158 million last year in fees.
However, Mr. Yu warned that Ant should not “spread too much” in a rush to enter all markets.
“The United States and Europe can harbor too much skepticism about a Chinese tech giant,” he said. “For Ant, it would do well to stay in Southeast Asia before going elsewhere.”
The company has come under attack by U.S. lawmakers, where President Donald Trump’s administration plans to place the group on a commercial blacklist, according to a recent Reuters report. Such a move could have implications for its partnerships with American companies, including Mastercard.
But for investors in its IPO, Ant remains a Chinese play. Kevin Kwek, analyst at Bernstein, said that at the moment “Ant’s investment story is primarily about China.”
The international push is still in its early stages and what Ant is focusing on is learning more about other markets, he said. And given its dominance in China and the liquidity it has, “they are, better than anyone, the best placed to do it.”
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