A few days ago we ran across a story that probably didn’t make headlines in too many places. Here at Tematica, however, it was quickly shared with the team because it perfectly depicts the coming together of two of our investment themes: The New Global Middle Class and the Digital Lifestyle. Here is part of the story from Mediapost.com:
Walgreens is adding the Alipay mobile payment platform to more than 7,000 Walgreens locations nationwide. Alipay, operated by Ant Financial Services Group and used by 1 billion people globally, will allow shoppers at Walgreens to use the same payment system commonly used in China. More than two-thirds of Chinese tourists used smartphones for payments abroad last year, according to Nielsen.The Alipay deployment will allow Walgreens to offer the payment system to more than 4 million Chinese travelers in the U.S. at any given time, and Walgreens is the largest U.S. drugstore chain to deploy Alipay, according to Walgreens. “Walgreens is focused on making shopping more convenient for our customers. This collaboration has particular significance for our Chinese customer population, who now has a new way to experience Walgreens,” stated Richard Ashworth, Walgreens president of operations. “Not only can they buy our products via our dedicated store on Alibaba’s Tmall Global marketplace, but they will now also be able to shop in the U.S. using Alipay as they would in China.”
Source: Walgreens Starts Accepting Alipay Payments Nationwide 02/19/2019
So here we have a U.S. retailer adding a mobile payment option specifically to cater to tourists coming from China. The global leader in mobile payments is mainland China, where 61% of worldwide users are based, and Alipay has emerged as the dominant provider, boasting over 850 million active users. In 2018, there were reports of apparel brand Guess adding Alipay as a payment option in 50 of its U.S. stores. That move by Guess followed on the heels of brands such as Lacoste, GNC, Rebecca Minkoff, Holt Renfrew and Harry Rosen offering up Alipay at checkout.
What we will be monitoring closely at Tematica Reseach is whether the use of Alipay can gain a foothold in the U.S. market beyond Chinese tourists. With over 189 million active iPhones in the United States, and most of those Apple (AAPL) devices equipped with the Apple Pay feature, a 2018 survey by CivicScience showed only 1 percent of respondents used mobile payments as their primary payment method over credit and debit cards or cash. With the average Chinese tourist spending over $5,000 on overseas trips, anything retailers can do to reduce the friction of a transaction is well worth it and U.S. consumers witnessing the ease of checkout for those tourists might just tip the balance across other apps as well.
Historically speaking, the adoption of new technology has been West to East, but when it comes to mobile payments the East is clearly leading the West. This has profound implications for potential winners in the push away from cash, checks and even debit and credit card swipes that is part of our Cashless Consumption investing theme. It also adds context as to why Apple, Google, and others are aggressively trying to move into those markets with Apple Pay and Android Pay to battle Alibaba’s Alipay, Tencent’s Tenpay, and Paytm – to sell more devices. As we’ve noted before, this is especially important to Apple as it remains reliant on iPhone sales.
Silicon Valley is home to the world’s most influential consumer-tech firms, but China’s online corporate titans are way ahead in the race to build mobile-payment services in many of the world’s fastest-growing consumer markets.
China’s digital-payments market, by far the world’s largest, is dominated by e-commerce giant Alibaba Group Holding Ltd. and social-media champ Tencent Holdings Ltd. Now these giants have started transferring money, product advice and technical know-how to mobile money startups in other Asian markets, from Indonesia to India.As people across Asia increasingly move from cash to smartphone apps for buying goods and transferring money between individuals, U.S. firms remain “still very focused on their home market” and trying to increase usage there, said Shiv Putcha, an analyst at research firm IDC in Mumbai.
Mobile payments in China were a $9 trillion market last year, according to iResearch—almost 90 times the size of the U.S. mobile-payment market of $112 billion, according to data from research firm Forrester.Two payment platforms—Alibaba-backed Alipay and Tencent’s Tenpay—handle some 90% of China’s online payments by transaction value, iResearch says. As China’s market matures, Alibaba and Tencent are chasing growth overseas, helping local startups in emerging markets run mobile-money systems that don’t require plastic.
Source: Alibaba and Tencent Set Fast Pace in Mobile-Payments Race – WSJ
Alipay, a third-party mobile and online payment platform developed by Alibaba (BABA), is teaming with First Data Corp. (FDC) tells that not only is our Cashless Consumption theme heating up in general, but the greater adoption of Cashless Consumption products and services outside the US likely means more international players than many a U.S. centric investor might consider. We also see signs of our Ultra Wealthy and Affordable Luxury themes at work as travelers from China to the U.S. looking to use mobile payment systems they use every day help “pull” them into the domestic market.
Alipay recently announced a partnership with America’s First Data Corp, in its latest effort s to expand its presence in overseas mobile payment market.The deal with the American payment processing services will allow 4 million merchants in the U.S. to accept Alipay, a boon for Alipay users shopping there.
“This will open up Alipay to where it’s truly ubiquitous across the United States and hopefully more countries later,” said Souheil Badran, president of Alipay’s North America operations. Alipay has been accepted by more than 100,000 retailers in more than 70 overseas markets, he added. According to Douglas Feagin, head of Ant Financial’s International Operations, the company has over 450 million registered users as of last October, one-tenth of whom were outside of China. If taking into account the 150 million users of Paytm, its strategic partner in India, Ant Financial has had nearly 200 million overseas users.
Source: Alipay teams up with First Data to increase US presence – TechNode