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Why Ant reigns in the land where cash is no longer king

In this country, as an ever-increasing number of transactions are done by electronic payments, we often talk about the cashless society.
What is less widely-appreciated is the extent to which the UK and other western nations are lagging behind China in this respect.
In China, the latest data suggests the value of transactions carried out by mobile phone apps is more or less neck-and-neck with the value of transactions carried out with notes and coins, or may even have already overtaken it.Street food vendors, buskers and even some beggars accept mobile payments.The growth of mobile payments in China dwarfs that elsewhere.In 2016, mobile payments in America were worth an estimated $112bn (€79bn), but in China they were put at more than 50 times that - an astonishing $5.5tn (€3.8tn).Even given the differences in population between the two countries, that is an extraordinary disparity and particularly given the sums Apple has been sinking into getting American consumers to use its Apple Pay service, which is now accepted by more than half of all US retailers.And, very soon, it seems investors will be given the opportunity to buy shares in one of the biggest players in the sector.The Wall Street Journal reports that Ant Financial, owner of the popular mobile payments system Alipay, is set to raise $9bn (€6.3bn) in a funding round that values the business at $150bn (€106bn).
Why Ant reigns in the land where cash is no longer king

Image:
QR codes of Alipay (top) and Wechat Pay in a toy store in China
The funding round is being seen as a precursor to a stock market flotation that would make Ant Financial the world's biggest ever 'unicorn' - the term that is applied to privately-owned companies, invariably in the tech sector, that have a value of more than $1bn.To put it in context, at its flotation in May 2012, Facebook was valued at $104bn.Alipay is used by more than 520 million people, mainly in China, each year.It was launched in 2004 by Jack Ma, founder of Alibaba, the e-commerce giant usually described as a Chinese equivalent of Amazon and eBay rolled into one.Alibaba spun off Alipay in 2011 and the business overtook PayPal as the world's largest mobile wallet service two years later.In 2014 Alipay's parent company was rechristened Ant Financial and earlier this year, Alibaba acquired a 33% stake in Ant in an asset swap in which no cash changed hands, which was seen as a step towards a flotation.
The growth of mobile payments in China partly reflects the country's obsession with new technology and mobile phones in particular.But it is also because the largest denomination note in the country is just 100 yuan, roughly equivalent to €11.20, making it essential to carry around a lot of notes. Mobile payments overcome that need.Everything Alipay does in China creates a stir.
Why Ant reigns in the land where cash is no longer king

Image:
A display promoting WeChat Pay and Alipay during the Money 20/20 conference in Las Vegas last year
Mr Ma himself hit the headlines when, in January, he was seen settling a bar bill in Chongqing, China's fifth-largest city, using a credit card rather than Alipay.The move was interpreted as a signal from Mr Ma, China's third-richest person, that Alipay was now so established he did not need to personally promote it any longer.The episode came just weeks after President Trump blocked Ant Financial's proposed $1.2bn takeover of MoneyGram, the US money transfer service, on national security grounds.This was despite Mr Ma promising Mr Trump that small American businesses would be allowed onto the Alibaba platform - a move, he claimed, that would create one million US jobs.Yet Alipay does not have this potentially lucrative field - it takes a modest fee from merchants of around 0.6% on each transaction - in China to itself.Its great rival Tencent, which owns China's most popular social media app WeChat, founded its mobile payment service, WeChat Pay, a decade after Alipay was launched but has come from behind to grab a commanding share of the market.Every WeChat user has a WeChatPay account, putting it ahead of Alipay in customer number terms, although the latter is still ahead in terms of the value and number of transactions it processes.Both are now vying for business among Chinese people travelling abroad - just before Christmas, WeChat Pay launched in the UK at Camden Market, where one in 10 visitors are Chinese - and both are spending heavily to attract new customers.The numbers are simply mind-blowing.
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Assuming Ant Financial comes to market, which is expected to see it listed in both Hong Kong and New York, the flotation could smash all kinds of records.Most people in the West have never even heard of this business - but many of them will know its name before long.
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