Ant Financial, the Alibaba affiliate that operates Alipay, is planning an IPO that could be worth hundreds of billions of dollars — but the funds it could raise are secondary to the consumer population it already controls.

Ant is reportedly raising another $10 billion, boosting its valuation to about $150 billion, though some market observers question that size. Ant's CEO, Jack Ma, has already taken Chinese e-commerce giant Alibaba public. Alibaba's valuation at the time of its IPO in $168 billion in 2014—and it is now worth nearly $450 billion. Compare these to their American counterparts and the difference is staggering.

PayPal's valuation at the time of its IPO was $46.6 billion; Square's valuation at the time of its IPO was about $4 billion, with a current market cap of about $19 billion; and Stripe's valuation is about $9 billion. Though Alipay is often characterized as an alternative payment provider or mobile wallet, Ant's pre-IPO value is more in line with the likes of Mastercard (which has a market cap of about $183 billion) and Visa (around $280 billion). PayPal's current market cap is about $93 billion.

Chart: Ant's big enrollment base

All about the enrollment base
Ant's biggest setback in recent months was its failure to acquire MoneyGram in part because of protectionist political pressure in the U.S. Even in light of this setback, Ant should not be meaningfully impaired in a heightened "U.S./China trade war," experts say.

Ant's greatest strength is its huge enrollment base. Enrollment is the key to any financial collaboration or merger because the enrolling party has more control over user data, and as such can demand better financial terms and gain more revenue from the cross-selling and marketing that is the main goal of most payment partnerships.

Amazon, for example, uses the enroll/control strategy to its advantage. Amazon is considering a checking account that would involve a bank partner—likely a large bank such as Capital One or JPMorgan Chase—but Amazon would control the accounts, giving the retailer the upper hand. Amazon offers debit perks for its Prime members, but the perks are structured to encourage loading and routing to an Amazon stored-value account, which de-emphasizes card brands and again gives Amazon control over the data. Amazon can do this because of its huge enrollment base. It doesn't share a lot of detail about specifics, though it's estimated Prime has about 65 million members.

Alipay is 10 times as big, at 600 million users. Alipay's user base is also more than that of six companies combined: PayPal, the three "Pays," Venmo and Zelle. Ant rivals WeChat and Facebook Messenger both have about a billion users each, though they are not strictly payment apps but social programs that embed payments for certain purchases.

The perks of being the biggest
Ant is already using that enrollment base to plant its flag all over the world through a barrage of partnerships, with nearly a dozen deals in the past year alone.

For example, Ant collaborated with Wirecard and Qatar Airways in 2017 to power Alipay in duty-free shops in Hamad International Airport in Doha with an eye toward further growth in the Middle East. And in Finland, it's possible to use Alipay to pay for an entire trip without converting currency because of Ant's local partnerships.

A deal with Openpay this year gave Alipay access to a payments for a Mexico-to-China e-commerce market that grew 28% in the past year. Last month Alipay extended its partnership with First Data as part of a 4-million-merchant deployment. Alipay's tie-in to FreedomPay gives it access to dozens of U.S. airports and travel plazas in the U.S.

A collaboration with Motion Pay, a Canadian startup that's focused primarily on Chinese payments, boosted Alipay's presence in Toronto, Vancouver, Montreal, Ottawa and other cities, with wide support among retail, restaurants and hospitality businesses. A deal with the National Payment Corp. of Vietnam in November introduced Alipay to the Southeast Asian nation. In September, deals with a group of local trade associations extended Alipay into the Nordics.

Alipay also partners directly with merchants, such as Starbucks, to expand its support in Asia, and has made merchant tie-ins a direct part of its expansion in the U.S.

Alipay has a technology advantage in addition to its size. It took a big step toward global payment technology dominance late last year, when it became one of a small handful of companies to have its QR code-based payment system integrated into EMVCo's global standards, potentially easing Alipay's entry into contactless payment markets in hundreds of markets.

Ant did not return a request for comment by deadline. Thus far, it has not established a domestic market in the U.S. In an earlier interview, Souheil Badran, president of Alipay in the Americas, has said there's enough business from China-to-U.S. travelers and part-time residents to feed Ant and Alipay's growth in the U.S.

Subscribe Now

Authoritative analysis and perspective for every segment of the payments industry

14-Day Free Trial

Authoritative analysis and perspective for every segment of the industry