How U.S. policy shifted Alipay's strategy in other markets
On the surface, Ant Financial's reported discussions to acquire U.K.-based WorldFirst demonstrate a savvy business move to establish itself beyond the substantial market it controls in China.
It also shows how far the Chinese payments giant is willing to go to resist the headwinds of U.S. policy — even if Brexit poses just as much challenge to Ant Financial's goals.
Ant Financial's business in the U.S. remains largely focused on catering to the Chinese travelers who use its Alipay wallet, but it could have done much more had its planned acquisition of MoneyGram gone ahead. When that deal fell apart this year, both companies indicated a key factor was their inability to satisfy the Committee on Foreign Investment in the U.S.
Ant Financial, the payments affiliate of Alibaba, will get close regulatory scrutiny no matter where it tries to do business based simply on its size and financial clout. The payments and financial services industries in many countries, including the U.S., are watching Alibaba and Ant Financial frontman Jack Ma closely in assessing what his next moves might be.
With the backdrop of Ma and President Donald Trump mostly viewing each other as business rivals, it is difficult to say how much of an impact Ant Financial can make in the U.S. under the current administration.
Thus, the focus is more on the U.K. as Ant Financial potentially becomes the first major Chinese business to enter the financial services sector by landing London's WorldFirst. Boasting of somewhere between 600 million and 700 million users, Alipay is already a powerful QR-code based mobile wallet player that is expanding its market. Most countries, including Canada and the U.S., know the importance of accepting the Alipay wallet at the point of sale in order to serve the millions of Chinese tourists annually.
Views vary on how the U.S.-China trade war would affect the countries' overall economies and, more specifically, the business strategies of key companies.
It's been easier to see how agricultural or electronics companies would be affected by import tariffs on billions of dollars worth of goods, but the intentions of an e-commerce giant like Alibaba are a little more difficult to pinpoint.
It seems more likely at the moment that the backwash of the rift between the U.S. and China would simply keep a powerful businessman like Ma reluctant to invest a lot more in the U.S.
But he's also smart enough to know that tariffs don't translate to less demand by consumers. Millions of consumers shop through Alibaba's e-commerce platform and use Alipay online and offline.
It would not be the smoothest of sailing for Ant in the U.K. either, in view of the Brexit proceedings that could change the fintech landscape considerably (with the U.K.'s role in question, many companies are turning to Lithuania as their gateway to Europe).
However, WorldFirst is an established U.K. operation with more than 600 employees and the technology and networks in place for a global money transfer operation. If Ant were to succeed in buying WorldFirst or a company like it, the deal would serve in part to restore the plans it had in mind when making a bid for MoneyGram.
Still, the potential political fractures caused by the U.K.'s departure from the European Union, would present an interesting question for Ant Financial and its long-term strategy. If the breakup results in an unsteady or restricted climate for fintech startups and challenger banks that rely on collaboration with the European Union, how does that affect Ant Financial's interests?
Despite its strength in China, this is a company that still has to rely on the cooperation and partnerships of other providers, whether they are partner banks, card networks, payment gateway/processors or even rivals.
Ma knows what types of partnerships will move his company forward. To demonstrate that point, one needs only to look at Ant Financial's ability earlier this year to structure Apple's first major retail agreement with a rival mobile payments provider in enabling Alipay to be used in Apple's stores in China. Apple also enabled Alipay users to open the wallet from virtual assistant Siri, rather than open it manually.
One factor remains a certainty. If Ant Financial lands WorldFirst, it gives the Chinese payments company solid footing on European turf — and a glimpse into what its plans for the U.S. might have been under more a welcoming administration.