Tencent, Alibaba target remittances in S-E Asia
Both have launched services for HK-based domestic helpers
JAKARTA: For Chinese tech giants Alibaba and Tencent, South-East Asian domestic helpers in Hong Kong may prove key to their global ambitions in financial services.
Both companies recently launched money-transfer services that allow Hong Kongbased workers from Indonesia and the Philippines to send money home cheaply and easily. The moves are a first step in going after a global remittance business that moves more than US$600bil around the world annually.
But the initiatives are also part of the firms’ broader efforts to take their wildly successful WeChat Pay and Alipay mobile payment system overseas.
South-East Asia, with a growing population of 600 million people who mostly lack bank accounts, is a strategic battleground for Asian tech behemoths and their US rivals.
Alibaba’s financial affiliate Ant Financial called its Hong Kong remittance initiative “a starting point and significant step in accelerating our pace to promote financial inclusion globally.”
Tencent’s WeChat Pay, which is ubiquitous in China but has struggled to gain traction abroad outside of Chinese tourist destinations, is more circumspect about the goals for its Hong Kong We Remit service, although a spokesman allowed it was open to “all possibilities.” Sending money across borders, however, is harder than it looks.
That helps explain why both companies are working with a Hong Kong-based financial technology start-up, EMQ, which has regulatory approvals and bank partnerships in place across South-East Asia and elsewhere.
“We are the pipes and distribution for Tencent,” said EMQ CEO Max Liu. He declined to comment on any relationship with Ant Financial, but three sources with knowledge of the matter told Reuters that Ant Financial is developing its own partnership with EMQ as part of a suite of new cross-border payment efforts.
Ant Financial declined to comment. The “pipes” are only part of the challenge. Reuters interviewed six Filipino and Indonesian domestic workers in Hong Kong who said it would take time to get their families to trust receiving remittances via their mobile phones.
Indeed, We Remit doesn’t currently link up to mobile phone wallets. Instead, recipients pick up funds at banks or pawnshops, just as they’ve traditionally done with services from market leaders Moneygram and Western Union.
For the senders, the new services can be a revelation. For years, the only way Filipino maid Rochelle Bumanglag could send money home was by spending her off days on Sunday waiting hours at banks and remittances shops in downtown Hong Kong.
“When I go to a bank, it’s a lot of queuing and a lot of hassle. WeChat, they always give us a good rate. It’s very convenient, very fast. I go to 7-11 and put money in my account,” the 42-year old said.
Another big attraction: neither WeChat nor Alipay are charging fees, at least for now.
“The WeChat rate is 6.80 peso to the HKD (Hong Kong dollar), whereas the bank’s rate is 6.79 pesos plus a HK$25 ($3.20) cable charge. It’s a big difference for us,” said Bumanglag, who sends about 10,000 pesos, or about HK$1,470, a month home.
Eventually, those new WeChat and Alipay users might be persuaded to use other services too, the companies hope.
Filipinos and Indonesian make up most of Hong Kong’s 370,000 domestic workers, according to government data. The two countries are among the world’s top recipients of money transfers: The Philippines received US$32.8bil in remittances in 2017, while Indonesia had US$9bil, according to the World Bank. Over US$16.9bil in remittances flew through Hong Kong the same year.
Global remittances to low and middle-income countries alone are expected to reach US$485bil in 2018.
The scale of the market helps explain why Alibaba sought to acquire Moneygram last year in a US$880mil deal that was ultimately scuttled by US regulators. Together with US-based Western Union, Moneygram has long been a dominant player in a business that’s traditionally depended on large physical networks of local agents ranging from banks to convenience stores and pawnshops.
Those expensive networks, together with complicated compliance requirements and other technical and regulatory hurdles, have meant high fees, often for those who can least afford it. Reuters found that remittance fees in Hong Kong start at HK$15 and can range to as high as HK$200, with additional costs sometimes in embedded in unfavourable exchange rates.
For now, WeChat and Alipay are focused on gaining acceptance. WeChat became operational in Hong Kong last year, working with EMQ and other partners including popular Filipino pawnshop chains Cebuana and Palawan.
Ant Financial’s venture, launched through its Alipay HK affiliate and based on blockchain software, started moving money between Hong Kong and the Philippines in late June. Unlike We Remit, it allows real-time transfers between Alipay HK accounts and the Filipino mobile payments service Gcash, which Ant Financial partly owns and which is operated by telecommunications firm Globe Telecom.
Sources say the Hong Kong initiative isn’t Alipay’s only move in remittances. Job advertisements in September for Ant Financial’s Malaysia office listed remittances as a responsibility.
The firm has launched joint ventures in seven markets for local digital payments services, which operate independently under the partnerships’ brand names, including in Indonesia and Malaysia.
Analysts say that AlipayHK’s remittance tieup with Gcash could be replicated in other markets.
“Ant Financial’s eventual aim is to create a global payment system for its consumers,” said Zennon Kapron, director of fintech consultancy Kapronasia.
“The first focus was following Chinese customers, the second was expanding merchant acceptance beyond typical tourist destinations, and the third is for local value wallets.” Ant Financial raised US$14bil in June, earmarked for its international expansion. — Reuters