An Ex-Goldman Banker Has Big Plans for Alibaba Finance Affiliate
When Douglas Feagin decided to leave Goldman Sachs Group Inc. after 22 years to run Ant Financial's global operations, his colleagues congratulated him. Then asked: "Wait, what does Ant Financial do?"
If Feagin does his job right, his new employer will be internationally known soon enough.
Ant is already a big player in China. The financial affiliate of e-commerce giant Alibaba Group Holding Ltd., Ant has 450 million customers, who use it to track shares, save money, invest in peer-to-peer lending and pay for things online via its Alipay service and much more. The company is kind of like Citibank, Paypal and ETrade rolled into one. Earlier this year, the company formally known as Zhejiang Ant Small & Micro Financial Services Group raised $4.5 billion at a reported $60 billion valuation, making it the most valuable Chinese fintech company by far. Ant Financial could go public as soon as this year, according to people familiar with the situation.
Feagin, one of several Wall Street vets to join Chinese financial institutions in recent years, was hired to help Ant Financial go global. He accepts this won't be easy and will take time. For now, he's building ties with foreign banks and companies, looking at potential investments and acquisitions and making sure the international efforts are coordinated with Chinese operations. "Our first mission is to follow Chinese consumers and what they want to buy around the world," Feagin said in his first interview since being hired in May. "The second part of our strategy is to build a local presence in countries we serve by offering Alipay, either ourselves or through a local partner."
China's so-called BATs—Baidu Inc., Alibaba and Tencent Holdings Ltd.—have all gone a-poaching at Goldman. Alibaba’s and Tencent’s presidents are both former Goldman bankers, Baidu’s head of global investments is an ex-Goldman managing director, and Tencent’s chief strategy officer was a managing director of the bank. Feagin, who previously led Goldman’s investment banking for financial institution clients in America and in Asia, said the Ant Financial job was a perfect fit. "I thought it was a great opportunity and decided to hop on board," he said.
Ant Financial began as Alipay in 2004, a Paypal-like online payments processor for transactions on Alibaba’s e-commerce sites. It’s since expanded to include services like Yue’Bao, the nation’s largest money-market manager, Sesame Credit, which is attempting to build a national ratings database to measure the risk of lending, and a private bank called MYbank. Alibaba founder Jack Ma spun off Alipay into a new company he controlled in 2011, and changed its name in 2014. Now that Ant Financial dominates payments on China’s biggest e-commerce platforms, the top priority is replicating that success globally.
To start with, the company is looking to leverage the tens of millions of Chinese who travel each year. Many already use Alipay at home so Ant Financial is cutting deals to let them use the service to shop, dine and travel wherever they go. The company says Alipay is already accepted by more than 70,000 off-line retailers in more than 70 countries and regions.
The next step is colonizing emerging markets. Feagin says he's looking at a host of countries, especially in Asia where Ant Financial can build from scratch or set up ventures with local companies. High on the priority list is India, which, like China, has a huge population with limited access to financial services. Last year, Ant Financial invested in Paytm, one of India’s largest digital transactions platforms. The strategic partnership essentially gave the company a payments banking license in India and a foothold in the country's rapidly expanding e-commerce market.
Ant Financial is also muscling into more developed markets. In recent months, it has sought operating licenses in Hong Kong, which is considering an application, and South Korea, where the company won preliminary approval for an Internet bank license through SK Telecom Co.
Ant Financial has designs on America, too. But the company is taking a slower and more deliberate approach to the U.S., where financial services and online payments are among the most advanced in the world. The company is counting on Feagin to leverage his relationships in the finance industry to help win acceptance from American merchants. Earlier this year, Uber agreed to let customers pay for their rides using Alipay in more than 400 cities. Feagin hopes to cut similar deals with retailers and restaurants in the U.S. and other developed markets.
Wedbush Securities analyst Gil Luria says Ant Financial is positioned to do well in emerging nations but will struggle to penetrate the more mature and hyper-competitive U.S. market. "They're Chinese, and many people in the West are suspicious of Chinese companies," he said. "Many consumers may be reluctant to give a Chinese company their financial information."
Feagin, who currently spends much of his time on the road chasing new business, acknowledged there will be challenges. But he expressed optimism. "When I look at the range of products and services that Alipay is offering to its customers in China and think about expanding that around the world, the number of opportunities market by market is really quite enormous," he said.