The AliPay hype factor
BY now, even the punters know that rampant speculation is driving up some tech stock prices. But with the market so hot, it would seem that not many may want to miss the party. One play this week is GHL Systems Bhd. The stock is now trading at a lofty 60 times earnings, compared with over 30 times just a week ago. An announcement early this week that it is partnering AliPay to provide payment services in Malaysia is what’s driving GHL’s share price.
The excitement is understandable, but not necessarily grounded. True, the fintech revolution is here to stay. Payment for products and services will be fully digitised in the near future, driven by convenience, security and lower transaction costs.
AliPay is an online payment platform and a product of Ant Financial, which, in turn, is the payment affiliate company of AliBaba. AliPay has an app that can reside in your mobile phone and be used to pay for things by waving it across the point-of-sale device.
In a country like China where credit card-usage is very low, it is no wonder that a whopping 450 million Chinese nationals use it, accounting for close to 70% of all transactions in that country, going by some reports.
And like many great China-originated innovations, the plan is to take it to the rest of the world. Due to the size of the China market, AliPay has been hitting phenomenal transaction numbers, positioning it to go up against the likes of Visa and MasterCard.
Will it succeed?
AliPay says it is accepted at more than 80,000 merchants in 70 countries. But that is largely to cater to Chinese users travelling abroad.
As analysed by The Wall Street Journal last November, taking AliPay global will not be a slam dunk. Banking is a tightly regulated industry, meaning that Ant Financial would need to pursue alliances to get access to local markets, the report said.
It also pointed out that wooing global consumers in markets where credit card-use is widespread will likely be harder.
Hence, the tie-up with GHL does hold potential. But for now, that would be limited to China tourists travelling to Malaysia and how much they use AliPay here. GHL has not disclosed the share of transaction fees it would be entitled to.
Furthermore, there is no indication that the deal is exclusive to GHL, meaning other payment companies here such as iPay88 and MOLpay could also tie up with AliPay.
Beyond this, giant banks in Malaysia, namely, Malayan Banking Bhd and CIMB Group Holdings Bhd have started talks to strike a deal with AliPay.
There are also a handful of e-wallet licence holders readying to roll out their services in Malaysia and they too can tap the market, possibly even Chinese tourists here, by making attractive loyalty and discount offers.
The authorities in most markets are not inclined to issue an e-wallet licence to global players like Ant Financial.
That would be akin to issuing a full banking licence to foreign banks, which explains why Ant Financial has been buying stakes in some foreign players.
In other words, the online or digital payment space is being cracked wide open, which is great news for consumers.
But it is left to be seen who the winners will be in this space.