Chinese electronic payments service Alipay.com is taking its growing rivalry with state-owned behemoth China UnionPay to the global stage, with word of a major new move outside its home market.
Alipay will follow a familiar route for globally minded Chinese companies, with a first stop in Hong Kong.
The firm is forming a major new alliance in the city with global hotel giant Marriott International Inc.
It is the first stop on an overseas tour in the course of which the financial services affiliate of Alibaba Group Holding Ltd. could challenge global names like Visa Inc. and MasterCard Inc.
This latest move is part of a larger new tie-up between Marriott and Alipay, which is part of the Alibaba-affiliated but separately owned Ant Financial.
The tie-up is mostly limited to mainland China initially but significantly includes Hong Kong-based hotels.
It is one of the biggest moves to date into Hong Kong by Alipay, which is better known as an electronic payments service used for smaller items, usually costing US$20 or less, using shoppers’ online accounts and smartphones.
Under the initial agreement announced this week, Alipay will be accepted at 10 Marriott properties in Beijing, Shanghai, Hong Kong and the Hainan resort city of Sanya.
As a former hotel reporter, I’ve always been a big fan of Marriott, one of the world’s best-run hotel companies, and should say by way of disclosure that I own some of its stock.
Thus this choosing of such a premier name for one of its first major offshore deals looks like a smart move for Alipay and should help reposition the service as more than just for small purchases by online bargain-hunters.
The Alipay payment option will be gradually expanded to other Marriott properties in Asia by the middle of next year and then to non-Asian global properties frequented by Chinese travelers by the end of 2016.
The choice of Marriott and Hong Kong as the first international stop on Alipay’s global expansion map looks like a smart move because of the large number of mainland Chinese travelers to the market.
But the acceptance of Alipay in Marriotts around Asia and in popular western destinations should also provide a lift to the payment service, especially among younger travelers who like the option of paying for things with the mobile-based Alipay Wallet.
This move is the latest in a string of Alipay tie-ups with major brands, as it poses a growing challenge to UnionPay, the state-run monopoly operator of China’s lone network for electronic transaction settlements.
Earlier this year, Alipay announced major new advances into fast food, signing agreements to roll out its service at KFC and McDonald’s, China’s two largest fast-food chains.
UnionPay, unaccustomed to challenges to its state-granted monopoly, has complained loudly about Alipay’s encroachments.
But there’s really very little it can do, since China has already signaled its commitment to opening the domestic market for electronic transaction settlement to competition.
Visa and MasterCard are already applying for permission to conduct such domestic business in China’s currency, following a World Trade Organization ruling in their favor on the matter.
UnionPay already has a 10-year head start over Alipay on the global stage and is accepted at a wide range of ATMs and shops in global locations frequented by Chinese travelers.
But Alipay is quite an aggressive company, and I suspect this new Marriott deal is just the first in a series of similar tie-ups through which the company will move into a wide range of retail destinations outside China and also possibly into banks with its own version of a credit card.
Investors interested in Alipay could also soon have a chance to buy into the company’s high-growth story, following recent reports of a potential domestic initial public offering on a new enterprise-style board being planned for Shanghai.
Such an offering would be available mostly to domestic investors but could also become accessible to international buyers via Shanghai-Hong Kong Stock Connect.
Bottom line: Alipay’s move into Hong Kong through a tie-up with Marriott marks the start of a major global expansion for the online payment service, with Hong Kong the first stop because of its strong China ties.
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