Looking back on the 2010s, they can be considered a golden age for China’s fintech sector, when a confluence of technology advancements, steady economic growth, growing consumer spending and regulatory permissiveness allowed companies like Ant Group to become highly profitable juggernauts. With that era long gone, and the regulatory environment much stricter, China’s fintech giants have to look for new growth opportunities. Regulators have indicated that they prefer firms that started out in payments to focus on that segment instead of areas like wealth management and consumer lending.
With that in mind, Alipay’s tie-up with Mastercard makes perfect sense. Remittances is a segment that Beijing supports as long as the money is being remitted into China. The agreement between the two companies announced in March, which expands Mastercard’s existing relationship with Alipay, allows consumers to receive money in their digital wallets in near real-time. This tie-up gives Alipay access to Mastercard’s massive global payments rail, while for the U.S. credit card, it has access to 1 billion users of the Chinese e-wallet. This deal should strengthen Mastercard’s foothold in China following it in 2023 acquiring a bank card clearing license together in a joint venture with the local firm NetsUnion Clearing Corp.
Interestingly, Alipay is at the same time trying to cater to international tourists traveling to China, whose international credit and bank cards may not work in the country. Before the mid-2010s, using cash solved that problem, but today China’s payments system is highly digitized, making the use of cash awkward at best. With that in mind, it is a wise move for Alipay to link up with other e-wallets so that their users can make payments seamlessly when they visit China.
In early April, Alipay announced the launch of a nationwide program with 11 overseas payment partners of Alipay+ to develop International Consumer Friendly Zones across key Chinese tourist and commercial cities. The launch included the announcement of a new partnership with Pakistan’s NayaPay, establishing the first direct payment channel between the two countries. Under the agreement, all NayaPay users will be able to make payments with their e-money account at Alipay+'s network of 80 million merchants in China.
Additionally, Alipay+ is reportedly planning to launch in Indonesia as well. However, on April 24 Indonesian central bank deputy governor Filianingsih Hendarta said at a news conference that Alipay+ had not formally requested a permit for operations in Indonesia.