There’s been lots of noise in the electronic payments space lately, as China gets ready to issue its second round of licenses to domestic players (Chinese article) and accepts applications from foreign firms (Chinese article), with eBay’s (Nasdaq: EBAY) PayPal most prominent among those applying. (English article) Into that mix we can also add this week’s news that Alipay, the e-payments arm of Alibaba Group, has purchased the China assets of OnCard Group International (Sydney: ONC), a small Australian firm that specializes in payments for plane tickets. In my view, all this noise is exactly that: lots of noise with little or no importance for the future. When you look at developed markets like the US or Europe, e-payments in both areas are dominated by credit card issuers Visa (NYSE: V) and Mastercard (NYSE: MA), which also own the top global electronic networks linking up many of the world’s banks. The only niche player that has come even close to competing with them is PayPal. So let’s translate that equation to China. In terms of Visa and MasterCard equivalents, the clear parallel is UnionPay, which operates a similar network and is backed by all of China’s top banks. (previous post) That means that MAYBE there is room for one or two more players at the most, meaning all these licenses now being awarded will ultimately be meaningless. PayPal would clearly like to take a similar position in China to its global position, and AliPay is certainly a leading candidate to become a major player, drawing on its tight connections to Alibaba.com (HKEx: 1688), China’s B2B commerce leader, and Taobao, a leading B2C site. AliPay’s acquisition of OnCard’s China assets looks interesting, until one looks further and sees that OnCard itself is a tiny company with a market cap of only $30 million. But regardless, look for nearly all of these new e-payment licenses to be business dead-ends, with only one or possibly two players surviving in a space that will ultimately be dominated by UnionPay and credit card issuers like Visa and MasterCard.
Bottom line: China’s electronic payments sector will ultimately be dominated by UnionPay and other credit card companies, leaving most other e-payments licensees bankrupt.
Related postings 相关文章:
◙ New UnionPay Tie-Up Boosts US Presence in IPO Run-up 中国银联携手US Bancorp 未来有望两地上市
◙ 360Buy Cuts Off Alipay As China Internet Froth Builds 京东停用支付宝印证中国互联网泡沫
◙ Alibaba in Alipay Deal: Jack Ma Wins Again 支付宝股权纷争尘埃落定 马云公关赚钱两不误
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ves that kind of growth, it could easily challenge industry leader Renren (NYSE: RENN), which reported 31 million users in the first quarter of this year. If Qing really achieves such fast take-up and Weibo starts generating some profits, I could see Sina packaging these two units together and making a US public listing for the pair as soon as the end of 2012. Meantime, Tencent has detailed plans to develop a mega-platform for both B2C and C2C called Paipai, and will put 500 million yuan, or about $80 million, behind the effort. Like Sina, Tencent has proved to be very adept at leveraging a huge user base for its wildly popular QQ instant messaging service into other areas, overtaking Shanda (Nasdaq: SNDA) and NetEase (Nasdaq: NTES) in just a few years to become China’s biggest online game operator. Of course, it will face stiffer competition in e-commerce, going up against sector giant Taobao, along with other names like Dang Dang (NYSE: DANG), 360Buy and Wal-Mart-invested (NYSE: WMT) Yihaodian. Despite that, I’d still give Tencent’s e-commerce initiative a fair shot at success due to its unique position as China’s Internet leader, while Qing’s success looks almost 100 percent guaranteed due to its links to Sina and Weibo.
Alibaba’s Taobao Mall, the B2C portion of Taobao that was split off into a separate entity under a restructuring last month (
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