The global payment landscape is undergoing a transformation from traditional methods such as paper currency and credit cards to e-wallets. According to the 2022 Global Payments Report by FIS Global, e-wallets are set to become the most popular payment method for global e-commerce sales, having accounted for 48.6% of transactions in 2021. Offline e-wallet payments have also reached 29%, and are expected to surpass credit card usage by 2025.
One of the pioneers of this payment revolution is Ant Group. After almost 20 years of global expansion, Ant has transformed its initial cross-border transfer guarantee business into the now-renowned Alipay+ global cross-border transfer solutions giant. Alipay+ currently serves over 2.5 million merchants worldwide, seamlessly connecting businesses with over one billion consumers.
Ant Group’s overseas business strategy began by providing support to China’s cross-border e-commerce industry. It then turned its attention to Southeast Asia and Europe, where it has won over partners and consumers alike thanks to the strength of its technology.
From Alipay to Alipay+
The story of Ant Group’s successful global expansion can be divided into three stages.
The first stage, which took place from 2003 to 2013, saw Ant Group set up AliExpress and Ali International Station and enable a “global payment” system where overseas consumers can use Alipay to make purchases in China. The second, which spanned2013 to 2019, was when Ant Group began aggressive promotion of Alipay and started looking into investing in mobile wallets overseas. The ongoing third phase, initiated in 2020, involves Ant Group continuing to establish partnerships between Alipay and overseas e-wallets to enable seamless payments.
Ant Group’s strategy is simple, and offers a win-win partnership — it extends its technological and service capabilities to the region it’s expanding in, while letting local mobile wallet companies handle the regulatory compliance and marketing. Since 2015, Ant Group has established dozens of such tie-ups with digital payment systems around the world, including GCash in the Philippines, TNG Digital (under the parent company Touch ‘N Go) in Malaysia, TrueMoney in Thailand, DANA in Indonesia, Paytm in India, bKash in Bangladesh, Easypaisa in Pakistan, Kakao Pay in South Korea, and Klarna in Europe.
These partnerships are more important than ever in an era where mobile wallets are becoming increasingly commonplace. According to the Digital Wallets report by Juniper Research, there were a total of 55 mobile wallets with an annual transaction of more than USD 1 billion worldwide in 2021. This number is expected to increase to 69 by 2025. However, since these mobile wallets operate independently, making payments to other countries online or while traveling is inconvenient. Alipay+ offers to integrate some of these systems, allowing for easier and faster transactions across borders.
The transformation is already underway. By April 2022, Alipay+ had already been adopted by more than 70,000 stores in Germany, Austria, Malaysia, and South Korea. In the same month, Ant Group signed an agreement that would make it the majority shareholder in Singaporean payment platform 2C2P.
The current battlefield: Southeast Asia
Ant Group saw the huge potential for digital payments in Southeast Asia. Developed countries in Europe and the United States have already established a relatively comprehensive financial services system, since traditional payment solutions could meet the payment needs of local users.
However, in Southeast Asia — with the exception of Singapore and Malaysia — the penetration rate of bank cards and credit cards is relatively low by comparison. Consequently, e-wallets possess the capacity to serve as an additional payment option alongside conventional cash transactions. Findings in the 2022 Global Payments Report by FIS Global show that Southeast Asia is the fastest-growing region in the world for mobile wallets: usage in Singapore, Malaysia, Indonesia, Thailand, Vietnam, and the Philippines has grown by more than 311%, and the number of users is expected to exceed 440 million by 2025.
Recent policy infrastructure also supports this growth, with most Southeast Asia countries actively developing the mobile wallet industry. Bank Indonesia released the QRIS system (Standardized QR Code Payment) in 2019, aiming to create a simple and efficient QR code payment transaction process. In 2020, the Malaysian government launched the MYR 450 million (USD 100.3 million) e-Tunai Rakyat initiative to promote e-wallets from providers such as Grab, Boost, and TNG Digital.
The market gap, growing demand, and supportive policies make Southeast Asia the go-to for Ant Group’s next expansion plans. However, as with any expansion, there are challenges.
The first potential issue is the penetration rate of mobile wallets. The same Global Payments Report by FIS Global states that Indonesia, Thailand, and Vietnam have relatively low rates of online payments, with 51%, 63.4%, and 53.8% of offline transactions still being made in cash, respectively. Second, the competition is fierce, and Ant Group faces opponents not only in the form of startups but also traditional financial institutions such as banks.
Third, in addition to competing with other e-wallet providers, Ant also faces direct challenges from Tencent. Tencent has been testing the waters in Southeast Asia since March 2018, after obtaining a third-party payment license in Malaysia. In October of the same year, Tencent invested in the Philippine e-wallet PayMaya, competing with Ant-backed Gcash in the local market. Tencent has also expanded its payment network through Shopee’s payment instruments ShopeePay and SeaMoney.
Landing in Europe
Compared to Southeast Asia, which has a larger gap to fill, Europe has already established a mature payment market. According to the same Global Payments report, bank cards still dominate the European market, but emerging payment methods like e-wallets and “buy now, pay later” schemes are booming in Europe due to the global pandemic and the growth of e-commerce.
The development of e-commerce in Europe has led to diversified local digital payments. Statistics from the same Global Payments report show that digital wallet usage will continue to rise. Already, in 2021, the proportion of digital wallet use in the total e-commerce transaction volume in France, the United Kingdom, Germany, Spain, and Denmark is 25%, 32%, 29%, 30%, and 26% respectively, with rising trends predicting even greater use in the coming years.
Another notable trend is that most countries in Europe have their own payment method that already dominates the local market and enjoys brand loyalty from its consumers. It will be a challenge for Ant Group to change the payment habits of local users. However, if Ant Group is able to target Chinese tourists in Europe and grow them to a sizable consumer base that uses Alipay+, it might be able to establish partnerships with local mobile wallets and enter the market.
This has been on Ant Group’s radar since 2016. Alipay has already been adopted by Paris Spring in France, Harrods in the United Kingdom, Munich Airport in Germany, Italy’s gourmet brand Eataly, Finland’s Santa Claus Village, and other retail, airport, and catering establishments. Visitors to these establishments can now use Alipay for payment and tax refunds. By the end of 2016, it had also gained a foothold with financial institutions and payment technology companies such as BNP Paribas, Barclays, UniCredit, and SIX Payment Services, working together to jointly promote mobile payment in Europe.
Ant Group has also created an opportunity for European countries to connect their own payment systems to the rest of the world. In early 2022, San Marino became the first European country to access Ant’s Alipay+ global cross-border solution. This one move connected them to more than ten e-wallets in Asia and over one billion consumers behind them.
It is clear that Ant Group’s international expansion strategy involves much more collaboration and partnership than competition. With the right alliances, its payment system benefits countries and economies all over the world, and can only get stronger over time as the effect snowballs.