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BIZ IN GRAPHICS | Meet the world’s most valuable startup that emerged from China’s online payment competition

Ant Group eyes the largest IPO of 2020 with a dual listing in Shanghai and Hong Kong.

Rumors about Ant Group a fintech affiliate of Alibaba (NYSE: BABAHKEX: 9988) and the world’s most valuable unicorngoing public, have surfaced every once in a while over the past few years. However, the company finally confirmed on July 20th its intentions to seek a Shanghai-Hong Kong dual listing plan.

Hangzhou-based firm Ant Group, previously known as Ant Financial, and valued at least USD 200 billion, aims to sell 10% of its shares through the dual listing, according to the Nikkei Asian Review, citing a person close to the matter, who added that Ant Group has generated USD 2 billion in profit in the last quarter of 2019.

Ant Group’s e-payment platform Alipay, born as a web-based payment solution for Alibaba’s flagship e-commerce platform Taobao in 2004, has become China’s most widely used third-party online payment service provider, with more than 100 million daily transactions and over 900 million annual active users in China. Ant Group’s competition with Tencent’s (HKG: 0700) WeChat Pay sharpened its edge as the company evolved into the fintech giant it is today.

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China’s mobile e-payment competition

Looking back, Ant Group’s USD 200 billion valuation didn’t come without a hitch.

Started with the birth of WeChat Pay in 2013, and settled with the Alipay-WeChat Pay duopoly in 2016, the e-payment competition has forged not just the cashless payment trend in China but also reshaped businesses in other internet sectors.

Back in 2014, when Alipay was already widely accepted as a payment tool in China, WeChat Pay was still seen as simply a red packets distributor on China’s top social app WeChat, with limited scenarios—friends and colleagues would use to chip in for lunches, for instance.

Tencent managed to turn the table later on, though. To encourage users’ adoption of its e-payment platform, it began to actively invest in popular internet services while pushing to establish WeChat Pay as their exclusive third-party payment. It also started rolling out its services to small vendors across the country that could not afford the high commission fee of the Point of sale (POS) system, but still wanted the convenience of no-cash transactions, a step ahead of Alipay at that time.

From 2013 to 2016, Tencent injected fresh funds into ride-hailing app Didi and on-demand delivery platform Meituan (HKEX: 3690), creating two of the most important alliances in the Chinese tech ecosystem.

In 2014, Didi, at the time one of the main players in China’s booming ride-hailing market, adopted WeChat Pay as its exclusive payment method. Didi managed to help WeChat Pay to gain millions of new users, as orders from Didi reportedly accounted for around 88% of WeChat Pay’s total transactions, according to tech news portal Latepost.

Meituan, on the other hand, provided WeChat Pay with a vast source of vendors and businesses adopting Tencent’s e-payment method. The Hong Kong-listed giant remains to be the largest third-party service provider for WeChat Pay till today.

In a way, WeChat Pay’s well-connected network of internet services inspired Alibaba, which quickly caught up by putting money into some rivals of Tencent-backed companies.

Ant Group invested in many firms, from food-delivery operator Ele.me to movie ticker seller and review site Taopiaopiao, together with local business rating service Koubei, which were then integrated into the Alipay ecosystem. Amid China’s bike-sharing battle in 2017, Ant Group also put money in a number of major players like Ofo, Yongon Bike, and HelloBike. Among them, HelloBike is still accessible today through Alipay.

As of the fourth quarter of 2019, though, Alipay still leads China’s third-party payment market with a 16% advantage over WeChat Pay, yet far behind the 76% market share it had in 2013, per data from iResearch and Analysys.

A super app and super fintech unicorn

Today, Alipay has evolved into a super app. Within Alipay, users can not only pay, transfer money, and manage their savings, but can also access other functions enabling local life services like food-delivery, hotel booking, and bike-sharing among others. It even allows pet owners to buy insurance by using facial recognition on their cats and dogs, as per Abacus‘s report.

Meanwhile, WeChat Pay is the preferred e-payment app by a variety of third-party brands present within WeChat’s mini-programs, while it also offers several other services such as payments for utilities, food delivery, movie tickets, hotels, flights tickets, and train reservations.

In light of COVID-19, which still persists in parts of China with sporadic outbreaks, WeChat and Alipay’s health codes demonstrated significant importance as they were used to track and provide information on citizen’s health status, KrASIA reported.

Ant Group’s success in the domestic market has allowed it to look for global expansion opportunities. Currently, Ant Group operates ten mobile payment platforms in markets across Asia.

Currently, the company has been working to optimize Alipay as a local life service platform. “Alipay also wants to prove that its app has value as a standalone app,” a product manager at Alipay, whose name was not revealed, told LatePost.

The dual listing plan will allow Ant Group to keep growing and transforming into a full ecosystem of services, while also “positioning the company to develop global markets with partners and expand investment in technology and innovation,” the firm said in a statement.