Eating the dust of Barclaycard’s partnership with Alipay, Finextra reports on the dominance of Ant Financial and Tencent in China and the emergence of the platform ecology business model in South East Asia, which will be dissected in detail at Money20/20 in Singapore this week.
Now making a play for the B2B sector, Big Tech giants are leveraging marketplace dynamics and are scaling at a hyper level to disrupt other business models but could come up against regulatory changes, forcing companies to evolve or die.
In addition to this, with billions being splurged on the likes of Grab and Go-Jek by Softbank and fast data speed, cheap connection and inexpensive smartphones available, platforms are booming across this region and can expand in the ride-hailing, groceries and retail markets.
Chinese tech giants are offering banks products and services built on cloud technology, machine learning and predictive analytics so that financial institutions can utilise this super app model to replace their core banking infrastructure.
However, as Drew Graham explained in Finextra’s feature on ‘The challenger bank playbook’, banks will become less relevant as those companies which are backed by Alibaba, Tencent and Softbank “start to monopolise the consumer digital experience.”
In conversation with Finextra TV, Rebecca Martin, content director of Money20/20 Asia, highlighted that “the rise that we’re seeing at the moment with Chinese tech giants like Ant Financial and Tencent is developing this new type of business model which we’re referring to as the platform ecology model, or the superapp model.
“What we’re seeing is that these tech giants - with their apps Alipay and WeChat - are developing financial services products, wider products and services, in these platforms that they’re offering to consumers. They now have in these apps search functionalities, commerce, navigation and conversation that all sits within this one superapp and this is allowing them to develop and contextualise seamless experiences for their customers that otherwise wouldn’t be possible.
Martin referenced Ant Financial as an example. Now valued at $150 billion, the tech giant is a top 10 financial services company, raised 35% of fintech funding globally last year and now has over 600 million Alipay users.
“At Money20/20, we’re going to shine a light on what this model looks like, what the economics are behind it, how it’s enabling these giants to achieve hyper-scale, but also how it’s enabling the third parties that are creating products within this ecosystem.
“These third parties start to look at each other as partners within this ecosystem, rather than competitors and they’re able to grow much faster than they would do by themselves because they have access to the customer base of these platforms to start off with.”
Platforms by definition
Speaking to Finextra Research, Drew Graham suggested that for the consumer, not much has changed because they are receiving “the same benefits as shopping centres offered them before, and the high street before that. Companies that natively and deeply understand the customer interface will set the rules for engaging with what will become ‘their’ consumers, and consumers will end up with a low-friction, engaging experience.
“However, history will repeat itself and we will once again sacrifice long-term social value and consumer protection at the altar of short-term convenience. The word ‘platform’ has come to mean a specific thing in this context, but we have to remember that they have existed for generations.”
Graham continued to detail how the concept of the ‘platform’ is not new: printed media distribution, cars, television, mobile phones and money itself is a platform. “Platforms aggregate the work that would be impossible to replicate without gigantic amounts of time and money and then rent it out to those that sit atop it; billion-dollar companies and many billionaires will be created on top of this new generation of platforms.”
And that’s exactly what has happened, as Christopher Davison, co-founder and group CEO of BigPay, explained. “Many successful payment companies evolve from a larger platform: PayPal and eBay, Alipay and Alibaba, and BigPay and AirAsia. Platforms and ecommerce players enable the growth of payments companies, open up wide distribution, drive closed loop sales volume, provide stock keeping unit level data insights and have potential to leverage a trusted brand.”
The European conundrum
Martin also discussed the possibility of the Chinese model expanding to other countries and perhaps even to Europe. “We’re already seeing this model expand outside of China, so there’s a big chance we could see it coming into Europe and maybe in the US as well.
“If we look at the internationalisation strategies of players like Ant Financial and Tencent, what they’re doing outside of China, is looking at partnering or acquiring with the leading mobile wallets in countries across Asia to get their customer base ready and then build those platforms underneath these mobile wallets.”
She went on to speak about Ant Financial’s partnership with Paytm in India, B Cash in Bangladesh and Mint in the Philippines where the focus is on strategy. There is also home-grown talent across South East Asia such as Grab making an impact in this space, offering lending and payments services.
In the UK, WhatsApp is slowly becoming a superapp with the ability to share pictures, message and conference calls on the platform, as Martin explained and with the tech company already offering payments services in India, the platform model may penetrate the European market sooner than we think. But the question here is whether it will be WhatsApp or Facebook, or an influence from the East?
However, Graham’s view is that as “WeChat, Alipay and their surrogates in Go-Jek and Paytm are heavily China-funded and China-owned and just as we’re seeing with Huawei and we saw with the MoneyGram acquisition, politics will limit their impact in the West. The Facebook backlash is evidence that consumers are becoming wise to the long-term destructive possibilities of platforms and Europe’s already onerous data privacy regulation will hamper the platforms from dominating the way they have in Asia.”
Davison also has views on regulation and predicts that superapps “will have a more limited impact in Europe. Mega-apps have succeeded in markets where regulation has prevented open market competition, and hence have an oligopoly to create a large user base to cross sell multiple and diverse products. In a more open market this situation is unlikely to occur.”