In WorldFirst deal, Trump-era isolationism weighs on Alipay
Ant Financial, the Chinese payments company that operates Alipay, has a scale that’s almost unimaginable to a U.S. audience. But the giant's ability to build a true empire has already run into regulatory trouble in the U.S.—and it’s affecting Ant's strategy worldwide.
Ant’s $700 million deal to acquire WorldFirst gives it greater access to the European market, and is a milestone for a company that’s long wanted to acquire a major player in a Western market to gain a local foothold for product diversification. But in announcing the agreement, Ant gave credence to the suspicion that WorldFirst divested its U.S. business at Ant's behest.
This was most likely to avoid running afoul of President Trump's policy against giving China too much influence within the U.S. That policy led U.S. regulators to impede Ant's earlier attempt to acquire MoneyGram, which is based in Dallas.
It's telling that Ant doesn't expect the same pushback from the U.K., where WorldFirst is based and where the same brand of nationalistic politics manifested in the Brexit vote.
“I think it’s interesting that WorldFirst shed its U.S. business to make this deal go through,” said Sara Grotta, director of the debit and alternative products advisory group at Mercator. “They don’t have a concern with regulators in the U.K. putting constraints around this deal?”
Ant and WorldFirst did not return requests for comment, nor did the Financial Conduct Authority or the Competition and Market Authority. These U.K. regulators in the past have taken a hard line on acquisitions that extend a single payment company’s scale within the U.K—most notably pressuring Mastercard to make concessions in its $920 million Vocalink acquisition back in 2017.
That kind of pressure likely won’t kill Ant’s deal, but there could be an impact on how much Ant and WorldFirst can integrate. For Ant and WorldFirst, the impact on the U.K.’s remittance market could be a factor. And overall political uncertainty could have a chilling effect that would not exist in another environment.
“Given [Ant's] scale and aggressiveness, they will never be out of the regulatory woods,” said Thad Peterson, a senior analyst at Aite Group, adding that EU regulators could also be a factor. “Managing regulators will be a core component of their payments business in every market except China.”
Ant, Alipay and Alibaba have long had global ambitions, generally partnering with local merchants to provide payments for Chinese travelers. It’s a diverse mix of deals: Alipay has used blockchain to expand remittances in Malaysia and Pakistan, a partnership to support payments at Walgreens; and Ant has even deepened its ties with MoneyGram despite the earlier acquisition falling through.
“WorldFirst is more of an international remittance organization with some additional features to help marketplace sellers to repatriate foreign balances or to facilitate international B2B trade,” Grotta said. “Perhaps Ant can take WorldFirst's FX capabilities and build on top of that.”
Ant's size is part of its power. It has a $150 billion valuation, which is more than Goldman Sachs or Morgan Stanley, according to Bloomberg, which notes that Alipay and related companies have 1 billion users.
WorldFirst would provide a platform to build out new financial services and an enrollment advantage, giving Ant control of even more consumer data for cross-selling, advertising and analysis.
“The WorldFirst acquisition is interesting as it enables cross-border remittance in markets where Alipay isn’t a significant factor,” Peterson said. “But it gives them a processing toehold in a lot of markets. This may be a move to add value to their shopping marketplace, AliExpress.”
The WorldFirst has the potential to open the AliExpress marketplace to non-Chinese merchants who want to market to Chinese consumers, Peterson said.
“In theory, a Chinese customer could purchase on Aliexpress using Alipay, and the funds could be repatriated to a merchant in Europe through the WorldFirst channel,” Peterson said.