It’s Bust-Out Time for Alipay in North America

For the China-based Alipay payments service, pursuing niche merchant markets in North America no longer is good enough.

“When we’re looking at partners, we’re looking for ubiquity,” says Souheil Badran, president of Alipay North America.

Those partners so far include First Data Corp., which in May opened its huge U.S. merchant base to Alipay, a mobile wallet used primarily in China and abroad by Chinese travelers. This base includes merchants using the latest smart terminals deployed by First Data.

“We are integrating into their Clover terminal,” says Badran in a wide-ranging interview with Digital Transactions. “That gives us access to 500,000 Clover terminals in the U.S.”

But it doesn’t stop there. Alipay, a unit of China’s massive Ant Financial Service Group empire, also has cut deals with terminal giants VeriFone Systems Inc. and Ingenico Group, as well as e-commerce processors Adyen and Stripe Inc.

Why the push for blanket U.S. acceptance? Because, says Badran, Chinese travelers are going abroad in increasing numbers, and their buying habits in the U.S. are changing. Chinese consumers are making 120 million trips abroad annually, a number that’s expected to grow to 225 million by 2022, according to Badran. When they travel to North America, he wants to be sure Alipay is accepted where they shop.

Some 450 million Alipay wallets are in use in China alone, and with Ant’s backing the functionality of the app goes well beyond payments. “We can extend credit, offer insurance on any product that can be shipped, and offer the ability to save money like with a money-market fund,” Badran says.

And soon the big money-transmitter MoneyGram International Inc. could become part of Ant’s offering. MoneyGram shareholders on May 16 overwhelmingly approved Ant’s revised $1.2 billion buyout offer—Ant’s original price was $880 million—in the wake of rival Euronet Worldwide Inc.’s unsolicited $1 billion bid for Dallas-based MoneyGram.

A pair of U.S. senators, Pat Roberts and Jerry Moran, have protested in a letter to Treasury Secretary Steven Mnuchin that the Ant-MoneyGram deal poses a national-security risk. Both senators represent Kansas, Euronet’s home state. The acquisition still faces a review by a federal committee charged with monitoring foreign investment in the U.S.

In the United States, Chinese travelers aren’t sticking to tourist locations, as they might have done in the past.

“The way the Chinese consumer is coming to the U.S. is changing,” Badran says. “It’s very customized. They’re going out and renting cars, eating at microbreweries.” Hence, he says, the push for “ubiquity” in acceptance for Alipay.

That’s more an aspiration than a concrete goal. Badran concedes the wallet will never reach 100% of U.S. merchants. But he wants to get as close as he can. Partly for that reason, Alipay is sticking with quick-response codes to link the app to the merchant’s point of sale. While merchants have been installing EMV chip card readers that often feature near-field communication (NFC), the technology required to accept wallets like Apple Pay, Badran says QR codes are likelier to yield the near-ubiquity he’s after.

“We’re not really looking at NFC,” he says. “QR codes right now are accepted by merchants. It’s easier than worrying about the firmware in the [POS] device.”

But could Alipay at some point offer competition for Apple Pay and the legion of other mobile wallets now available in the U.S., a number of which also rely on QR codes? That may happen, but offering Alipay to Americans “is not a priority for us right now,” says Badran. “We’re sitting back and observing the market.”

Indeed, for now, Badran says, “There are enough wallets in North America.”

—John Stewart