Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche


Alipay Comes to America

The US mobile payment and digital wallet market is about to get disrupted big time. The world’s most valuable financial-services unicorn; Ant Financial, has entered the U.S. mobile payments market through its Alipay App.

Ant and First Data Corp (NYSE: FDC) signed a deal to let merchants accept Alipay payments via the Clover solution, Bloomberg Technology reported. Clover is First Data’s answer to Square (NYSE: SQ) and it gives Alipay access to four million US retailers.

This deal will give Alipay access to almost as many as US retailers as Apple Pay; which services 4.5 million brick and mortar stores, from the begninning. It might present a real challenge for Apple (NASDAQ: AAPL) because Alipay is potentially more secure than its product.

Will Alipay Hurt Apple Pay and Android Pay?

Like Android Pay, Alipay’s mobile wallet supports American Express, Visa and Mastercard credit cards. Yet it uses a different technology to communicate with cash registers.

Android Pay, Apple Pay, and Samsung Pay use Near Field Communications (NFC) which sends a wireless signal to a register. Alipay relies on Quick Read (QR) code which generates a digital bar code that a phone scans with its camera. That’s potentially more secure because the payment transaction takes place in Ant’s system not the retailer’s.

This presents a huge problem for Apple and Alphabet (NASDAQ: GOOG) which owns Android Pay. Walmart (NYSE: WMT) America’s largest retailer refuses to take their apps but it has its own QR code solution; Walmart Pay; and plans to accept JPM Morgan Chase’s (NYSE: JPM), Chase Pay which also employs QR Code.

Would Walmart Accept Alipay?

Tim Cook’s worst nightmare then would be Walmart accepting Alipay but saying no to Apple Pay.

That would be a real coup for Ant because Walmart operates 4,672 stores in the United States; including 3,522 supercenters and 660 Sam’s Clubs. It might also force Apple and Alphabet to add QR code to their mobile wallets.

In addition to Walmart, most major US retailers; including the largest standalone grocer Kroger (NYSE: KR), the biggest online merchant Amazon (NASDAQ: AMZN), the dollar-store giants Dollar Tree and Dollar General, and the second largest discounter Costco Wholesale (NASDAQ: COST), refuse to take NFC wallets.

Ant might be banking on that to sell its products to the American mainstream. If it can become the digital wallet accepted at Walmart it will own the working class market in the USA.

Ant’s Secret Weapon Chinese in the USA

Ant has a secret weapon in the payment wars that gives it a huge opening advantage in its foray into America; several million loyal users who are already here.

Ant has around 400 million users in China, where it and WeChat dominate the payment market. Many of those users also visit the United States, Quartz reported. This readymade customer base includes three million Chinese visitors to the US each year, 350,000 Chinese students studying at U.S. universities and around 2.1 million Chinese immigrants.

It would be worth Walmart’s while to add Alipay just to serve the Chinese students and recent immigrants. What’s more interesting is that customer base is expected to grow in coming years. The number of Chinese visitors to America is expected rise to six million by 2021.

All of this means that Ant might be in a position to quickly become a major player in the U.S. payment app market. If that occurs, Ant Financial might become the most valuable Fintech company in the world. Making its founder Jack Ma even richer than he already is.