Both Ant Financial and Tencent have been jostling over the mobile payment space in China. It seems all the other players have been relegated to the point of irrelevance.

There are many 3rd parties in China trying to measure the market share – the resulting numbers differ a bit, though the consensus is that Alipay has managed to hold off the onslaught brought by Wechat pay since the latter started the red packet campaign.

Many have put the Alipay market share to be about 54%, while Wechat only about 40%. And this has not changed for the last few quarters.

NO IPO soon
In June this year, when Alipay raised a mind-boggling US$10 billion at a whopping valuation of US$150 billion, some of our friends suspected that an IPO is coming soon.

We told them that an IPO would probably still take years, if not decades.

Imperium maximum
A key reason:  Ant Financial has no time to get complacent as the regulators in China tighten their regulations over mobile payment apps.

The People’s Bank of China (PBOC) has capped the maximum mobile transaction amount to about 500 yuan (100 SGD) to reduce fraud. It was bad news when both Tencent and Ant Financial have been trying to convince their customers to make bigger ticket purchases through their mobile payment platform.

Just recently, the PBOC has also introduced a new rule that required all third party payment, including  Alipay to channel its payments through a new clearinghouse that it owns by June 2019.

Governments in Singapore have already done that, through UPI and PayNow respectively. Thailand is also enhancing its PromptPay system. The rational is simple: Central Banks are taking back their control (and some of the functions they should rightfully be performing) before it is too late.

Dinero duro

That is not all. The PBOC has  announced that it required both Alipay and Wechat Pay to put 100% of the customer deposits in a single dedicated custodial account at a commercial bank and specified that this account would pay no interest, by 2019.  

With this new law, it is expected that both Alipay and Wechat pay would have a much harder life.

That said, Ant Financial has been a resilient company, weathering through a lot of challenges while continues to prevent other potential competitors from taking off.

And Jack Ma, though ‘retiring’ soon, has been a very shrewd politician. His famous remarks earlier this year that “Alibaba is willing to donate Alipay to the state” cunningly shut a lot of critics off.  Before that, rumours circulated in Beijing that Alipay is doing too much which was supposed to be done by the Central Bank (i.e. PBOC).

Moving forwards, challenges with the government will still exist and explode once in a while. That is the risk of being the top player in a new, potentially very lucrative, field.

Fortunately, Alipay does not have to worry too much about competition now. Even in oversea markets, it has enough financial power and technological advantage to simply invest in or buy out players with potential, so that it does not have to risk failure building things on their own.

Thanks for reading The Low Down (TLD), the blog by the team at Momentum Works. Got a different perspective or have a burning opinion to share? Let us know at [email protected].