Local acquisitions – Alibaba and Ant Financial’s choice of expansion in Asean

Alibaba and Ant Financial’s entry in Asean is aggressive but there is still much to be done before they dominate the overseas market.

Editorial

Ant Financial is a world leading digital financial service provider. It is an affiliate company of the Alibaba Group as well as the parent company of Alipay. In the past few months, Alibaba and Ant Financial have entered partnerships with a string of Fintech firms in South East Asia. They aim to distribute its technology and business model across ASEAN.

Alibaba and Ant Financial ASEAN footprints

On 1 November 2016, Ant Financial invested in Thailand’s payment company Ascend Money. Ant financial will help Ascend Money grow its digital and offline payments and financial services business. It has sent a team to help Ascend develop technology and train professionals. In return, Ascend Money will open doors for Ant Financial in Thailand.

On 22 March 2017, Alibaba announced to set up the Malaysian electronic world trade platform (eWTP) in Malaysia’s digital free trade zone. The eWTP will include a regional logistics centre near Kuala Lumpur International Airport and an accompanying electronic. It aims to simplify the process for small and medium enterprises (SMEs) to conduct cross-border trade.

On 12 April 2017, Ant Financial announced a strategic partnership with Emtek Group, the leading media company in Indonesia. The two companies will cooperate to launch a mobile payment platform in Indonesia. This will help to increase accessibility of digital financial services in Indonesia.

On 12 April 2016, Alibaba revealed an investment of US$1 billion in Singapore’s Lazada. Lazada is a leading e-commerce platform in ASEAN. On 28 June 2017, Alibaba reinvested US$1 billion in Lazada, increasing its stake from 51% to approximately 83%. On 19 April 2017, Ant Financial acquired the payment service helloPay Group, who attached to Lazada.

On 27 November 2017, Ant Financial bought 45% stakes Globe Fintech Innovations Inc. (Mynt), a Fintech business based in the Philippines. With over three million register users, Mynt is the biggest mobile money base in the Philippines. Ant Financial will share its digital financial systems with Mynt and accelerate local financial inclusion in the Philippines.

Sources: CNBC, SCMP, Ant Financial, TechCrunch (1,2), Business Wire, The Manila Times

Acquisition of local firms as a weapon of choice

Alibaba and Ant Financial have expanded their presence in ASEAN through M&A and partnerships. In these acquisitions, Ant Financial commit not only capita, but also share technology and customer-service know-how.

Local partnerships help Alibaba nagivate local payment environment. Their partnerships with leading local companies are argubly more familiar with the domestic market, financial industry and regulations. At the same time, Alibaba and Ant Financial will acquire financial licenses through the stake acquiring in local companies.

Challenges lie ahead

However, there are potential risks for cross-border cash flows. A bank executive said each money transfer handled by banks for Alipay is usually packed with thousands of small transactions involving numerous individuals and small vendors. It poses a great challenge for banks to check the authenticity of every transaction. “Some of these transactions may involve money laundering risks,” the bank executive said.

Meanwhile, Fintech giants like Tencent and JD.com are also making high-profile investments overseas to compete with Alibaba. Ride-hailing platforms like Grab has developed their own payment systems. There will be fierce competition in ASEAN’s e-commerce and mobile payment markets. More left to be done if Alibaba wants to take the dominance.