All systems go

Apple Can Thank Alipay for Shopping

Jack Ma's First Data deal could boost everybody's payments systems.
At Closing, April 20st
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At Closing, April 20st
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News that Alipay hooked up with First Data Corp. in the U.S. may end up being more significant for both the Chinese fintech player and for Apple Inc. than Jack Ma's $1.2 billion bid for an old-school payments provider, MoneyGram International Inc.

In one swoop, the payments affiliate of Ma's Alibaba Group Holding Ltd. gets access to 4 million U.S. merchants, not far behind the 4.5 million that Apple says are in its Apple Pay network.

With two major financial-processing deals for Ma's empire in the U.S. this year, it's natural to look for a link between them. They're actually mirror images of one another. The MoneyGram acquisition is designed to bring more U.S. sellers into the Alibaba ecosystem by making it easier to offer goods and settle transactions.

With First Data, Alipay is also encouraging Chinese consumers to shop in the U.S., where the uptake of mobile payments lags the progress made at home.

More Mobile

The U.S. currently lags China in the proportion of customers using mobile payments to settle transactions; that's forecast to change in 2018

Source: Statista

Clearly this pits Alipay against Apple Pay in the world's largest economy. But I am going to go out on a limb and say this is a good thing for Apple. That's because the iPhone maker's biggest challenge in payments isn't its Chinese counterpart, but U.S. consumers' comparative indifference to mobile payments.

Getting retailers to offer tap-and-go transactions to shoppers, be they Chinese tourists or U.S. residents, gets them into a habit that will also benefit Apple and make users more addicted to their iPhones. The downside to Apple is limited because it's unlikely Alipay will see a surge in U.S. customers as a result of the deal.

Volume Play

China is expected to maintain its lead over the U.S. in the amount of transactions settled by mobile payments

Source: Statista

Announcing the tie-up now certainly helps Ma make the case that he's all in on the U.S., a PR exercise that may aid his effort to get the MoneyGram purchase past local regulators. But the deals stand alone.

And rather than wrest share from Apple Pay, the First Data move is more about regaining momentum after losing ground in China to Tencent Holdings Ltd., which has leveraged the popularity of WeChat to roll out WeChat Pay. In February, both internet companies announced a tie-up with Citcon, a Chinese-funded Silicon Valley-based payments provider, but Alipay's First Data deal now dwarfs that move and leaves Tencent to play catchup.

Eroding Share

Alipay dominance of China's third-party mobile payments business has been weakened by strong momentum for Tencent's offering

Source: Analysys

Note: Data for 4Q 2015 unavailable.

Anything that hurts WeChat helps Apple. That's because the chat app's ubiquity and deep bench of in-product offerings threatens the iPhone platform's relevance in China.

But Tencent's overseas ambitions are conspicuous by their absence and Jack Ma is seizing this moment.

Though it's counterintuitive, success for Alipay could be of great help to Apple.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

    To contact the author of this story:
    Tim Culpan in Taipei at

    To contact the editor responsible for this story:
    Paul Sillitoe at

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