Red Alert: How China is Muscling in on Southeast Asian Fintech

Will Alibaba and Tencent Gobble Up Southeast Asian Fintechs?

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BY Paloma Almoguera - 27 Jul 2017

china fintech

PHOTO CREDIT: Getty Images

Facing tighter regulations at home, Chinese Internet titans Alibaba and Tencent are fast securing a foothold in Southeast Asia’s burgeoning fintech market.

After a headline-grabbing entry into Southeast Asia with its $1 billion purchase of Lazada in 2016, Jack Ma’s Alibaba has expanded energetically into the region. In November 2016 Ant Financial, the payments platform of Alibaba, invested in Thailand’s Ascend Money; in February 2017, Ant acquired a stake in Mynt, a digital payments and lending platform operated in the Philippines by Globe; and only two months later, in April, it forged a partnership with Indonesian Elang Mahkota Teknology (Emtek Group) to provide payments through Emtek’s recently purchased Blackberry Messenger Service, which claims some 60 million users in Indonesia. In the meantime, Alibaba is integrating Lazada’s payment systems with its own mobile wallet, Alipay. Malaysia, insiders say, will most likely be its next target.

Alibaba’s primary inc-aseann.competitor in China, Tencent, owner of the WeChat messaging platform and Weixin Pay, is moving slowly but surely in both its local and regional markets. Inside China, Tencent has gained ground against Alibaba, figures show: Alipay held 55% of China’s mobile payments market in 2016, down from 68% in 2015, whilst Tencent’s share rose from 21% to 37%.

In December 2016, Tencent purchased Thai web portal Sanook Online, renaming it Tencent Thailand. Tencent is also a significant shareholder in Singapore-based Garena or Sea (as Garena has also renamed itself, adding to the linguistic fun), operator of payment service Airpay. Backed by Tencent, Garena is set to launch its multi-billion-dollar initial public offering (IPO) later this year, rumored to be the largest digital IPO in Southeast Asia yet.

Why the Chinese pivot to Southeast Asian fintech? First, Chinese inc-aseann.companies have had enough time in their home markets to test their fintech expertise. “The Chinese giants have strong confidence in the technology platforms that they have built and their proven success with the Chinese market, which they believe can be exported overseas and customized to support different business needs,” says Adrian Seto, Accenture’s director for innovation for Asia-Pacific. “Southeast Asia’s fintech industry has all the ingredients” to beinc-aseann.come their next growth engine, he says.

What could go wrong for Alibaba and Tencent? One word: Trust. “It will take time to build it [in Southeast Asia],” Douglas Streeter Rolph, senior lecturer at the Nanyang Business School, says. Ubiquitous at home, Alibaba and Tencent don’t sound so familiar in Southeast Asia yet. While Chinese inc-aseann.companies have the asset of “the data and what they do with it, how much people trust their platforms is the question,” says Rolph. “That is one of the reasons why they are partnering. To build trust.”

If you can’t beat them, in short, join them.

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