When China is the focus, it's natural that any discussion revolves around gigantic figures, volumes, and potential. In line with this trend, Ant Financial, a Chinese financial services company resulting from a spin-off of Alibaba, constantly amasses impressive numbers.

The company's flagship product, Alipay, launched in 2004, is the prime example of this approach. The payment platform now has 1.2 billion users and provides access to over 100 services. Through the app, it's possible to call a taxi, buy movie tickets, schedule medical appointments, book hotels, or purchase products from street vendors, among other features.

In its roadmap to building this impressive foundation, Ant Financial, officially established in 2014, attracted US$22 billion in four investment rounds. In its largest round, in 2018, it raised US$14 billion. With this investment, led by Temasek and the Singapore Sovereign Wealth Fund, the startup was valued at US$150 billion and achieved the status of the world's largest fintech company.

To achieve this status, the group has practically not ventured beyond the Great Wall. But, little by little, the company, which is still controlled by Alibaba, which owns a 33% stake in the operation, is beginning to expand its reach beyond China.

This strategy gained new momentum in December when Simon Hu, an executive with experience in various leadership positions at Alibaba, took over as CEO of Ant Financial. He replaced Eric Jing, who remains as the group's executive chairman.

In an internal memo, the company highlighted that the appointment integrates “growth efforts in three strategic pillars: globalization, domestic demands, and technology.” In practice, with the new structure, Hu will be more focused on local operations. Jing, in turn, will be more dedicated to the development of technologies and new markets abroad.

International scale

Interestingly, one of the latest signs of Ant Financial's appetite for international markets was given domestically. Since November, foreign tourists visiting China have been able to use many of the services offered through Alipay. Valid for up to 90 days, access to the app's features is via a mobile phone number and an international bank card.

The app's "tasting" strategy addresses one of the main dilemmas in this expansion strategy. "Their biggest challenge is getting non-Chinese consumers onto their platform," says Jeffrey Towson, a professor at Peking University.

Conversely, Towson points out that the company's main strength in this endeavor is being the link between Chinese customers and retailers and brands worldwide willing to access a consumer market of this size. This applies whether through e-commerce purchases or those made by Chinese tourists traveling abroad.

Jack Ma, the founder of Alibaba, owns 33% of Ant Financial.

This approach is at the heart of another recent move by the group. Also in November, Alipay announced its goal of supporting the growth of 10 million small and medium-sized enterprises in Europe over the next five years by offering technologies and connecting them with a potential universe of more than 2 billion tourists and consumers.

“Our solutions will help European retailers better serve the growing number of tourists and consumers visiting the region,” said Eric Jing during the Alipay Partners Global Summit, an event held in London.

As part of this strategy, Alipay has partnered with the French company Worldline to enable these retailers to accept payments made through the app and other digital wallets from Asian countries with which the platform has partnerships, including South Korea, Thailand, Malaysia, the Philippines, Indonesia, and India.

At the same time, Alipay developed features in its app focused on enhancing the tourist experience at airports. The package includes services such as payments, flight information, transportation reservations, personalized recommendations, discount coupons, and the option to buy online and pick up the product at the destination airport.

Partnerships are, in fact, one of the main ways for Alipay and Ant Financial to gain international scale. Currently, the platform already has agreements with more than 250 financial institutions worldwide, with more than 120 in Europe alone. The scope also includes companies from other sectors, such as travel agencies.

Access to the large volume of Chinese travelers around the world is also the currency for closing deals in countries like the United States. One of these partnerships was established in February of last year with Walgreens. Since then, these tourists have been able to purchase products using the app in more than 7,000 stores of the American pharmacy chain.

The American market, however, is another major challenge for Ant Financial. And the company had a clear demonstration of the difficulties of achieving scale in the United States even before the increase in trade tensions between the country and China.

In early 2018, the group saw its proposed acquisition of MoneyGram, a Dallas-based payments company, blocked by the United States Committee on Foreign Investment. Even the efforts of Jack Ma , founder and then chairman of Alibaba, were insufficient. Before the veto, he met with Donald Trump to seal the terms and conditions of the $1.2 billion deal.

However, investing in startups and fintechs directly related to the group's business remains a priority in its expansion strategy. In this regard, Ant Financial announced in November plans to raise a new fund of approximately US$1 billion, focusing on startups in emerging markets, particularly Southeast Asia and India.

Partnerships are one of the main ways for Alipay and Ant Financial to achieve international scale.

Currently, the group has 72 investments in its portfolio. The most recent were made in December and involved eMonkey, a Vietnamese payment service, and Anyscale, an American app development platform.

“The company is building a global financial services platform,” says Towson. “And they are already a real concern for companies like Visa and Mastercard.”

Domestic market

In parallel with its internationalization strategy, Ant Financial continues to develop new offerings in the Chinese market. Today, in addition to Alipay, the group's local portfolio includes businesses such as lending, wealth management, and a digital bank, among other services.

To broaden this scope, in December the company partnered with the American asset manager Vanguard to form a joint venture focused on providing consulting services to Chinese investors.

Beyond the natural evolution of the business, this and other moves are seen as a reaction to growing competition, expressed in other Chinese services such as Tencent's WeChat Pay, and even global rivals like PayPal, which entered the country in December by acquiring 70% of the also Chinese GoPay.

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