QiandaiPay was founded in 2008 and three years later, received licenses for online and mobile payments, card acquiring and forex operations. Thanks to a competitive market environment, the company made a decision to focus on small and micro offline merchants, and built almost no business online. According to Analysys International, QiandaiPay had 0.53% of the third-party payments market in 1Q2016 - a rather small market share and a clear hint that Meituan-Dianping had not been looking to expand its customer base with this acquisition.
We discussed previously how Meituan-Dianping had been accused of processing payments without a license in the past. Thus, the primary reason for the coupon giant paying a rumored RMB 800 million for QiandaiPay is to operate legally. Having a payment processor in-house also means Meituan-Dianping won't have to pay other companies to process payments. This is a big reason why payments licenses are expensive, and are increasing in price as the PBOC is tightening their issuance. At the beginning of the year, Xiaomi paid RMB 600 million for a license and media reports claim the Midea Group paid as much as RMB 1.3 billion for one.
When interviewed about the acquisition, Qiandaibao' founder and chairman Sun Jiangtao raised a controversial idea that "there's no space for pure play companies in future in China". In Sun’s opinion, companies with access to consumer channels, such as Alibaba (Taobao), Tencent (WeChat) will process the payments themselves, and there won't be need for any independent processors. This is certainly a turn of events the industry did not predict just a few years go, and the industry is certainly shaping up to look different from many other markets.
Other investments into payment companies support Sun’s idea - Huawei invested in Yeepay, Lenovo now holds a stake in Lakala and 99bill was bought out by Wanda. This in fact leaves the industry with very few pure-play payment companies. The ones left are ChinaPNR and Yinsheng E-pay. Could we hear about M&A deals with these companies too?