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Alibaba enters through “backdoor”
On November 6, 2017, Jack Ma, CEO of Alibaba Group, will attend a briefing of developing e-commerce and mobile payment at Vietnam Electronic Payment Forum 2017, which will take place in Hanoi. Afterwards, Jack Ma will attend the 2017 APEC Economic Leaders' Meeting Week in Danang.
According to business circles, Jack Ma is probably looking for a way to enter the Vietnamese fintech and electronic payments market, which holds great potential.
In China, electronic or online payment methods are completely replacing cash payments as most people to use their phones to pay for their daily shopping needs.
According to a report conducted by Analysis International—a Beijing-based consulting company—in the second quarter of 2017, the total value of third-party mobile payment transactions reached $3.460 billion in China.
In particular, the two giants, Alibaba and Tencent, are making up 92 per cent of the mobile payment market in China. Of this, Alipay, Alibaba’s mobile payment service, takes the lead with 53.7 per cent of the market, while Tencent Finance’s Wechat Pay accounts for 39.1 per cent.
|Alibaba, China’s technology giant, is seeking a way to penetrate the electronic payments market in Vietnam (On Photo: Alibaba CEO Jack Ma and Tencent CEO Pony Ma Huateng )|
Yuebao, a mobile deposit and investment platform developed by Jack Ma, has become the world’s largest monetary fund with a total capital surpassing $170 billion. It has become a direct threat to the traditional Chinese banking industry.
Yuebao receives money from Alipay accounts, paying higher interest rates than the banks’ average lending rates, making Alipay a huge idle fund with more than 300 million users allowing customers to easily transfer and withdraw any amount of money at any time in a few steps.
Yuebao has attracted 100 billion yuan from more than 29 million customers in just six months after its launch. It then offered loans to both businesses and individuals with attractive negotiable interest rates.
Prior to this, Alibaba spent $1 billion acquiring Lazada, a leading online shopping channel currently operating in Singapore, Malaysia, Thailand, the Philippines, Indonesia, and Vietnam.
Exactly one year later, in April 2014, HelloPay—Lazada’s online payment service—was successfully merged with Ant Financial, Alibaba’s online mobile payment platform. After that, HelloPay changed its name to Alipay Singapore, Alipay Malaysia, Alipay Indonesia, and Alipay Philippines, according to the markets where Lazada operates.
In another move, Jack Ma now plans to spend $1.5 billion investing in Grab, which is “stirring up” the Vietnamese market. Previously, Alipay has cooperated with Grab by allowing Chinese tourists visiting Singapore and Thailand to pay for Grab via Alipay since June 2016. According to Grab, this allows Chinese travellers to freely pay in yuan without having to worry about foreign exchange rates.
Alipay is shaking up the market and is becoming a real threat to the financial industry in Southeast Asia. Alibaba’s ambition to penetrate the Vietnamese market has also become very clear.
A subsidiary of Alibaba is said to have applied for payment authorisation in Vietnam, but has not been granted one yet. According to Vietnamese laws, payment intermediaries are conditional business lines, subject to strict conditions as assessed and licensed by the State Bank of Vietnam.
As committed to the World Trade Organization (WTO), regarding intermediary payment services, Vietnam has no commitments to expand or open up the market for foreign investors.
On the other hand, with respect to conditional business lines, the ownership ratio of foreign investors in the telecommunications sector ranges from 49 to 65 per cent (with or without network infrastructure). Meanwhile, since the banking sector is a sensitive industry, the government is limiting foreign ownership in banks to 30 per cent.
Yet, it seems Alipay is trying to enter Vietnam through the backdoor. To date, the group has tried to acquire Lazada and Grab to penetrate the Vietnamese market in particular and the ASEAN in general.
Tencent hunting for acquisitions
Meanwhile, Alibaba’s main rival Tencent has also made quite a few fierce moves. The strategy Tencent is pursuing is the acquisition of e-commerce platforms to set foot in the electronic payments market by its main service Wechat Pay.
Wechat now has 938 million users each month and its payment platform has been launched in Europe, Southeast Asia, and Africa.
In Vietnam, Garena, a subsidiary of Tencent, now occupies a large market share in the gaming industry and is turning to e-commerce. Most recently, Sea (Garena renamed) bought an 82 per cent stake in Foody.vn for $64 million. Sea has also expanded its e-commerce and online payment services with the introduction of Shopee and AirPay.
At present, Shopee receives around 2.7-3.6 million orders every month, equivalent to 100,000 orders per day and is on the way to catch up with Alibaba’s Lazada Vietnam.
Many believe that Tencent’s payment application seeks to penetrate Vietnam through the e-commerce channel and will expand into the financial sector after securing a firm position. Particularly, Wechat Pay will follow millions of Chinese tourists to Vietnam each year.
This strategy of Chinese tech giants penetrating Vietnam, given the realities in China, Europe, ASEAN countries, and Africa, has seriously depressed Vietnam’s corporate banks as they are afraid that Alibaba and Tencent will seize and manipulate the Vietnamese financial market in the coming time.
“Let’s imagine Wechat or Alibaba or even both of them pouring tens of millions of dollars into the Vietnamese financial market, accepting massive losses to launch attractive promotion programmes, even willing to forego service charges in the first two to three years. Then, what will be the future of the payment sector in Vietnam? $10 million or $100 million is clearly not a big deal for Wechat or Alibaba to increase market share,” said Tran Cong Quynh Lan, VietinBank's deputy general director.