The Ant/MoneyGram deal could be very disruptive, globally and long term
Oftentimes in our payments ecosystem, we read about partner deals and acquisitions that are thought to be potentially disruptive. That is rarely the case. Sometimes, like the PayPal “partner” deals with Visa and MasterCard announced in 2016, the deals are incrementally good for all parties, but hardly change the landscape.
I think the acquisition of MoneyGram by Ant Financial (parent of Alipay) will change the global payments landscape. It will shake things up for all global players, but will particularly impact, over the long term, PayPal, Visa and MasterCard.
This move signals to me that Ant is moving quickly worldwide, and they will leverage MoneyGram’s network of business, bank, consumer, and other partner relationships to achieve its goal. I am considering Ant’s ambitions beyond what they are getting with MoneyGram’s significant assets. It shows that Ant is a serious player, and we should watch them in the future. They could become the dominant global player offering businesses and consumers access to a range of services via mobile experiences.
PayPal has shown very good growth in its merchant volumes and in mobile payments, as they announced in their release of January 26. These trends bode well for PayPal, and I continue to be optimistic about their future. However, in my opinion, one key to PayPal’s long term growth will be the emerging payments markets in India, Latin America and Africa. The best opportunities for exponential growth are in countries where the unbanked population has access to smartphone technology, where they have a demonstrated demand for financial services, and where banks have failed to reach them through traditional brick and mortar branches. These populations often skew toward a younger demographic, meaning people who will grow up engaging with the world with mobile devices and will expect to consume financial services the same way. I have not yet been able to see a coherent long term strategy for PayPal’s success in these countries.
Ant Financial/Alipay is another story. The way that they grew in China by entering payments (via the Alibaba ecosystem) was impressive, but then they expanded into all sorts of other financial instruments. They offer a range of payment, wealth management and microfinance services via mobile devices to a population otherwise ignored by the banks. In recent years, they set their sights on emerging markets, notably India. This quote in the same release by Eric Jing of Ant Financial stands out “The acquisition of MoneyGram is a significant milestone in our mission to bring inclusive financial services to users around the world……. We believe financial services should be simple, low-cost and accessible to the many, not the few. The combination of Ant Financial and MoneyGram will provide greater access, security and simplicity for people around the world to remit funds, especially in major economies such as the United States, China, India, Mexico and the Philippines.”
Likewise MasterCard and Visa have been competing for years in the mature markets of North America, Europe and some APAC countries (mostly Australia), and they have moved more slowly in the less mature markets.
There is only so much more that PayPal, MasterCard and Visa and others can do in markets that are saturated with financial services. The emerging markets offer much more potential for growth and profit. The legacy players may find themselves locked out by fast-moving Ant Financial in the near term. Longer term, they could next aim at North America and Europe. Look out.