Who owns the future? The governments or the internet giants (or someone else)?

In the first two parts of this analysis, we discussed why we couldn’t exactly replicate Alipay and Wechat in Southeast Asia and examined plausible and implausible use cases for the region.

In this 3rd, and last, installment of this analysis, we will cover some direct and indirect initiatives by Alibaba and Tencent, as well as governments in the region.

Alipay everywhere?

Recently, many friends are impressed by the prevalence of Alipay banners, signs, and acceptance at merchants’ terminals – particularly in popular tourist destinations such as Bangkok and Singapore. They ask us: “So Alipay is really here to conquer the region?”

Well, the truth is, all these acceptance points are serving tourists from China – in the same way as you bring your Visa card for payment when you travel abroad. The merchant will accept Alipay payment; money is then settled, cross-border and through an acquirer, into merchant’s account.  

Alipay has covered a lot of merchants

There is certainly a big reason for Alipay to aggressively acquire merchants in this region: about 20 million Chinese tourists are expected to visit Southeast Asia this year, with an average spending of more than US$1000.

This market used to be dominated by UnionPay, China’s equivalent of Visa or MasterCard. Just as in China, small merchants are shifting to Alipay (or Wechat in some cases), while UnionPay still controls big payments (such as Louis Vuitton boutique).

Real strategy of Ant

So what’s Alibaba’s real agenda for the region’s local consumers? First is to fix Lazada’s HelloPay, since renamed Alipay.

Regardless, as e-commerce penetration is not that high in the region, HelloPay is not really an immediate candidate for digital wallet or mass mobile payment adoption.

Those familiar with the inner workings of Alibaba would know that the strategic investment, Ant Financial (owner of Alipay) and Taobao are different branches with their own planning and agenda.

One strategy of Ant is investing in potential champions in each country and fostering them with Ant’s technology, experience, and know-how. Recently, Ant has invested in Ascend Money in Thailand, Mynt in the Philippines and Touch N Go in Malaysia, among others. In Indonesia, there is a joint venture with media group Emtek being built.

Chinese internet giant in Southeast Asia: Investment and M&A

How this strategy will work out is still a question mark. Ultimately Ant is a small shareholder working with strong local forces. This is different from PayTM in India, where Alibaba is the biggest shareholder.

Since we mentioned about PayTM – one thing interesting there is that PayTM traditionally did not own any use case. Recently with additional funding from Alibaba, they are aggressively entering e-commerce. Worth watching.

The rest of  (B)AT?

How about Tencent? Nothing significant on the surface it seems – after the WeChat payment efforts in Malaysia didn’t achieve many results.

That said, the investment of Tencent might offer some clue. For example, its lead of the new funding round of Go-Jek. We believe their objective here is to have an (observer) foothold in the payment space, allowing them to get a better understanding of the market while deliberating the next move.

Does anyone remember Baidu Wallet?

A sea of Pays

Aside from the big guys, there are aspiring players who aggregate payment methods. In fact, there are tonnes of them: Uniweb Pay, CodaPay, AsiaPay, RedDot Pay, Doku Wallet, Ocean Pay…

Aggregation is useful – it makes life easier for merchants. As a business, though, aggregation only makes sense if the volume is huge, as it is often a low margin business doing all the hard work. In addition, if you are not big you do not even have the pricing power, depressing your margin further.

We expect the competition in this space to be intense and many small(er) players will be squeezed out of market sooner or later. The surviving ones, if they are smart enough, would try to leverage their data advantage. Whether Alibaba or the government lets them reach there is still unclear.

National interest

Payment infrastructure is of strategic importance to a country, for this reason, we doubt any sensible government will allow it to be dominated by a foreign company.

We believe Ant prioritizes investing in national champions for (at least partially) the same reason.  

So what are the governments doing? Singapore is certainly speeding up things. In August Lee Hsien Loong, the Prime Minister, declared that Singapore will adopt a national system of QR based payments.

A few players, including the country’s payment network Nets, have already revealed their response to this call. PayNow, a transfer network based on phone numbers, is being rapidly rolled out – giving any future QR based payment system a master identifier (phone numbers) for users, and an interoperability framework.

Singapore is trying to launch the national payment system based on QR

Thailand has launched its own QR based system called PromptPay. Recently there have been rumors that the two countries (Thailand and Singapore) are talking about interoperability of the two systems.

Both echo the recent efforts by India to build a national network for mobile payment.

So, lots of actions. Who will eventually prevail?

It is hard to say.

But one thing is certain – consumers can look forward to a much easier payment system, through their phones.

That day will probably come very soon.


[This analysis was originally published by Momentum Works in Chinese; translation into English by Brenda Singh]

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].


Previous articleMobile payment in Southeast Asia – overview and trends – Part 2/3
Next articleAre ICOs a more democratic way of fundraising?
Prior to Momentum Works, Yorlin was in the financial sector in SIngapore and Hong Kong for 10 years - working with the Monetary Authority of Singapore, AXA and HSBC. She feels that corporate knowledge are undervalued in the start-up ecosystem and want to change this. At Momentum Works, she manages operations, overseeing joint venture operations with partners from all over the world. She always makes time to speak to people as you never know what’s the next game changer in the fickle world of fintech, e-commerce or mobile internet. In her free time, you can find her being the slave to her 5 cats.