Alibaba’s $11 billion IPO makes Alipay the Stripe of Asia

Alibaba’s gigantic stock debut in Hong Kong gives it extra fuel to become a global payments empire.

This is further fueled through an international network of merchants, consumers, and a subtle deal inside China that came just before the IPO.

Via Alipay, Alibaba has established a payments business that’s available at foreign merchants that serve travelers from China. Market by market, it has made deals with merchants, airports and travel businesses to allow “own currency” payments. Through Alibaba’s $11 billion IPO this week in Hong Kong, the company has the additional heft to offer domestic payment services, as well as additional financial services.

Qilai Shen/Bloomberg

Much like Stripe has used its core business of enabling digital payments to build its valuation to more than $25 billion — giving it the ability to expand its relationships beyond payment acceptance — Alibaba has the chance to elevate its status at foreign merchants.

Alibaba did not return a request for comment by deadline. In the past it has said the company's primarily interested in its Chinese traveler business, which is large enough —though it made a small yet notable move just before its IPO that suggests it’s looking to broaden its enrolled user base outside of China.

Alipay is operated by Alibaba affiliate Ant Financial and has more than one billion users. In early November, Alipay opened its service to international visitors to China, allowing tourists to use their mobile phones to pay through a QR code and a prepaid card from the Bank of Shanghai. That makes Alipay available to non-Chinese users.

Like Stripe and Square, which offer lending based on future payment flows, a large merchant and user network can be the base for merchant credit or other types of lending. Alibaba has recently been accumulating partnerships with companies that process payments outside of China, such as Adyen, Verifone and Fiserv's First Data.

“I would not be surprised to see these (Chinese) e-commerce giants start to provide payment services to customers in other markets as well,” said Ron van Wezel, a senior analyst at Aite. “Perhaps starting with small-to-medium enterprise financing, leveraging their huge e-commerce platforms.”

Alibaba's first U.S. IPO was in 2014, which was the largest IPO in U.S. history at the time. It's latest listing this week in Hong Kong was Hong Kong's largest IPO in nine years and boosts Alibaba's market capitalization to nearly $500 billion. Given Alibaba's e-commerce heft and its links to Alipay, the new stock listing heightens Alibaba's competitive threat to U.S. and European payment companies, as well as Alibaba’s local rival Tencent, which has built a similar global payment network for travelers through WeChat’s payment app.

“Alibaba with Alipay and Tencent with WeChat see increasing acceptance of their wallets around the world,” van Wezel said. “This is limited to Chinese travelers for now, although that is a big market by itself.”

Alibaba and Alipay’s affiliation and penchant for reaching new markets for Chinese travelers has not yet taken the next step of enabling non-Chinese users to make payments in markets outside of China.

“The expansion of Alipay throughout Asia, Africa, and South America should be expected. This could increase the usage of the payment method in the United States as more travelers from non-Chinese regions come,” said Krista Tedder, head of payments at Javelin Strategy & Research. “Merchants in the United States who are in destination locations will want to consider.”

Beyond the partnerships with processors, Ant in early 2019 acquired U.K.-based payment company Worldpay for $700 million, giving Ant access to European markets and improving Alipay’s ability to compete with Western Union in Europe following Western Union’s collaboration with Amazon.

“Alibaba and Ant are sister companies and work hand in hand in many markets,” said Eric Grover, a principal at Intrepid Ventures. “This IPO boosts Alibaba’s war chest for acquisitions and strategic investment.”

Alipay also worked with European mobile wallets Bluecode, ePassi, Momo pocket, Pagaqui, Pivo and Vipps to push a standard QR code to streamline mobile payments in Europe. Alipay generates a lot of data. Its users access the app more than a dozen times each day, which the company uses to power incentive marketing and other services — also providing a route to expand services.

Any move by either Alibaba/Alipay or Tencent/WeChat Pay into the U.S. would have political hurdles. China has made it very difficult for U.S. firms trying to establish a payment market in China by floating the idea that is is open, then creating prohibitive restrictions.

While the U.S. doesn't use the same tactic, U.S. political pressure has already sunk Ant's attempt to acquire MoneyGram, though the two companies still work together. Alipay additionally has supply chain payment relationships inside the U.S., which gives it more of a payments presence in the U.S. than meets the eye.

And Alibaba's new listing in Hong Kong comes amid domestic political turmoil and protests, which Alibaba was able to weather well enough to raise only slightly less than analysts' expectations.

Alibaba is riding a hot streak given its recent record performance during China's Singles Day, which could also fuel the company's expansion. "Alibaba is investing in third party payment wallets in India and Southeast Asian markets,” van Wezel said. “These giants are going global.”