FINANTS

China’s financial payments giant is coming for Western Union

Alibaba Group co-founder and executive chairman Jack Ma speaks during a news conference in Hong Kong, China, June 25, 2018.
Alibaba Group co-founder and executive chairman Jack Ma speaks during a news conference in Hong Kong, China, June 25, 2018.
Image: Reuters/Bobby Yip
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On Monday (June 25) Ant Financial, the payments and financial services arm of Chinese e-commerce giant Alibaba, unveiled a cross-border remittance service powered by blockchain technology. Its release marks the company’s expansion into the global remittance market, after an attempt to purchase an American remittance company failed due to political pushback.

The feature is only available right now for Hong Kong users of Alipay, Ant Financial’s main payments app, and Filipino users of GCash, a mobile wallet that Ant runs with Philippines telecom provider Globe Telecom. At a press demonstration in Hong Kong, a Philippine worker completed a remittance transfer on her phone through the service in just three seconds.

Ant Financial is entering a huge market. Research from the World Bank shows that officially recorded remittances to low and middle-income countries hit $466 billion in 2017. India had the highest inflows at $69 billion, followed by China ($64 billion) and the Philippines ($33 billion). Most of this money gets transferred through banks or specialized remittance companies like Western Union—the world’s largest money transfer company—and MoneyGram, all of which charge hefty fees for moving funds.

Apart from the long standing players, a number of tech startups like TransferWise and WorldRemit, both UK-based, offer remittance services. But Ant Financial, which claims to have more than 600 million users in China, will make a formidable competitor.

Ant Financial first hinted at its ambitions to take on the remittance market when it attempted to buy MoneyGram, a Western Union rival based in Dallas, Texas, in a deal that was valued at $880 million upon its announcement. One year later, Ant Financial confirmed that the deal had fallen apart due to failure to secure approval from US regulators. Washington has been ramping up its scrutiny toward Chinese acquisitions of US tech companies under the Trump administration, and US lawmakers expressed the concern that data from MoneyGram users under Ant might ultimately end up in the hands of China’s government.

Ma referenced the failed deal when announcing the new blockchain-powered service. “A few years ago we wanted to buy the American company MoneyGram,” he said. “Unfortunately, due to reasons from the US our deal to buy MoneyGram did not succeed, so I said to Eric Jing [CEO of Ant Financial], ‘Let’s make one better than MoneyGram.’”