Alipay expansion: How it can benefit Southeast Asia and its economy

Online payment platform Alipay already serves 200 countries online and dominates in China. Now they are looking to step up expansion into Southeast Asia. How did they get to where they are now, and will they crack the ASEAN market?


The first giant of online industry strode across the Chinese market when Alibaba launched Alipay in 2004 and integrated it with Taobao. With eBay defeated, it set Alipay on the path to become China’s biggest third-party payment platform, now claiming more than 400 million users.

Alipay offer an escrow service, which allows consumers to verify they are satisfied with the product before releasing payment for it. 68% of transactions in China are now made through this method. Alibaba founder and executive chairman Jack Ma has talked about the trust gap that Alipay’s service filled in China, successfully shifting e-commerce behaviour to allay consumer fears.

The growth model that worked in China cannot be directly copied in Southeast Asia

In Southeast Asia, that trust gap is not present. Cash on delivery (COD) still dominates. Establishing ties with companies such as Ascend Money, Lazada, Moneygram, and Mynt shows that Ant Financial Group – Alipay’s parent company – is taking a different approach to the region. They have to; e-commerce in the ASEAN region shares few similarities with China.

Omise in Thailand and Doku in Indonesia have already tried to force a move away from COD without success. Ant recognises that a different model is required to successfully expand Alipay into ASEAN markets. They have started to make acquisitions and form partnerships instead of trying to introduce one unified payment platform throughout the region.

This strategy was stepped up last year when Ant invested in Ascend Money

In November 2016, Ant took a 20% stake in Ascend Money, a provider of e-payment services and micro-loans in Thailand that also operates in Cambodia, Indonesia, Myanmar, the Philippines and Vietnam.

According to Ascend chief executive Punnamas Vichitkulwongsa, the move is designed to offer Chinese tourists a payment option they are familiar with as they travel abroad. “It makes a lot of sense for the likes of Alipay and WeChat Pay to penetrate key countries that the Chinese travel to,” he said.

But is there money to be made from just catering for tourists? Almost certainly not, but Ant would argue this investment is not just about helping Chinese travellers, but about helping locals. As Ma said, “Everyone should have a bank account” while Vichitkulwongsa believes Ascend’s own experience and expertise can help Ant develop its model to better serve Southeast Asia.

Ant will also provide strategic and technical support to Ascend Pay to help it grow its online and offline services. “The payment market in Thailand has vast untapped potential and we are dedicated to contributing our share to bring a greater variety of convenient and reliable financial services to small and micro enterprises and individual consumers,” Ant Financial chief executive Eric Jing confirmed.

The Lazada deal is Alibaba’s biggest overseas investment to date

Alibaba’s biggest overseas deal was struck in 2015 when they invested US$1 billion in the ASEAN market by taking a controlling share in Lazada Group SA. Described as a clone of Amazon, Lazada are an established presence in the region and have already overcome some of the difficulties the region presents.

By taking a stake in the leading e-commerce platform, Alibaba has bought its way into the knowledge and experience of a successful operation. This is part of their goal to “understand” customers in the region. It also enables Chinese retailers to sell to Southeast Asian consumers.

Integrating Alipay is the next step. Florian Holm, Lazada’s chief executive, explained, “HelloPay is going to integrate with Alipay. It has massively better systems. It’s extremely important to have good fraud detection,” before adding that, “Alipay is the biggest and most sophisticated wallet in the world.”

Lazada now plans to introduce Alipay in Indonesia. If it works, it will solve a huge problem with COD logistics. Yet, there are still significant barriers to overcome. Indonesian customers are wary of online payments. A 2015 survey found that 34% of online consumers were afraid of fraud and that manual bank transfers (57%) and COD (28%) were the most popular payment methods. There are also technical and regulatory hurdles to clear.

They invested in M-Daq on the quiet

Ant Financial’s investment in Singaporean start-up M-Daq followed hot on the heels of the Ascend Money and Lazada deals and was a much smaller and low-key affair. M-Daq revealed only that a “new strategic investor” had come on board.

M-Daq piloted a Forex e-commerce product called ‘Aladdin’, claiming the technology reduces the cost of cross-border transactions and offers more predictable rates for merchants. These are attractive benefits for Ant as they try to expand.

They broke new ground by investing in Mynt

Ant’s most recent move is an undisclosed investment in Mynt, a Globe Telecom financial venture and its first investment in the Philippines. Mynt provides a micro-payment service and mobile loans. Globe Telecom has 66.6 million subscribers, making them the Philippines’ largest operator.

Ant will help upgrade Mynt’s services and the investment shows they are taking aim at the Philippines’ Fintech market. Ant will partner with Mynt, “to provide simple, secure, low-cost, and accessible digital financial services to unserved and underserved individuals and small and micro enterprises in the Philippines,” Jing said.

The Fintech market in the Philippines is growing steadily. Statista report that in 2017, transaction value in the Fintech market in the country was US$5.5 billion, and this is forecast to grow to US$11 billion by 2021. Digital payments, digital financial services and marketplace lending are all established, yet 69% of Filipino adults still do not have a bank account. It is an opportunity Ant are sizing up.

We are confident that having a strategic partner for Mynt will help fulfil our mission of providing financial services in a non-traditional manner that will benefit the majority of our population who are unbanked. With this partnership, we are set to democratize financial services in the Philippines,” Globe president and chief executive Ernest Cu said.

The merger with Moneygram puts Alipay on the world map

Ant Financial’s US$880 million purchase of Moneygram will also expand Alipay into Southeast Asia, and around the world. It follows similar partnerships with KakaoPay in South Korea and Paytm in India.

According to Ant, the deal will “provide consumers in over 200 countries and territories with convenient and accessible financial services, which furthers Ant Financial’s mission to promote equal access to financial services globally.”

The more than 100 million Chinese citizens who travel abroad each year will also benefit, adding to Alipay’s global reach. The more reach they have, the more customers they could have, and the more penetration they will obtain.

Linking in with Moneygram’s 350,000 locations should serve Alipay extremely well. Moneygram’s digital remittance capability is a useful addition to Alipay’s services and Moneygram needs the backing of a global player as it faces the increasing threat of Xoom (run by Paypal), WorldRemit and TransferWise. The merger will work well for both parties if it gets regulatory approval in the US.

By collaborating rather than conquering, Alipay are well positioned in Southeast Asia

Alipay’s size and dominance in China offers no guarantee of success in Southeast Asia. This is why Ant is investing in, and partnering with, companies in local markets. They must plot a slower course in Southeast Asia and work with companies who can provide them access to customers and technology. In return, Ant brings capital, experience and expertise. It is a more collaborative approach, but one that ensures their route towards global penetration remains on course.