latest-news-headlines Market Intelligence /marketintelligence/en/news-insights/latest-news-headlines/china-payments-giants-may-face-limited-risk-tweak-growth-plans-as-us-mulls-ban-60665376 content
Log in to other products

Login to Market Intelligence Platform

 /


Looking for more?

Contact Us

Request a Demo

You're one step closer to unlocking our suite of comprehensive and robust tools.

Fill out the form so we can connect you to the right person.

If your company has a current subscription with S&P Global Market Intelligence, you can register as a new user for access to the platform(s) covered by your license at Market Intelligence platform or S&P Capital IQ.

  • First Name*
  • Last Name*
  • Business Email *
  • Phone *
  • Company Name *
  • City *
  • We generated a verification code for you

  • Enter verification Code here*

* Required

Thank you for your interest in S&P Global Market Intelligence! We noticed you've identified yourself as a student. Through existing partnerships with academic institutions around the globe, it's likely you already have access to our resources. Please contact your professors, library, or administrative staff to receive your student login.

At this time we are unable to offer free trials or product demonstrations directly to students. If you discover that our solutions are not available to you, we encourage you to advocate at your university for a best-in-class learning experience that will help you long after you've completed your degree. We apologize for any inconvenience this may cause.

In This List

China payments giants may face limited risk, tweak growth plans as US mulls ban

US Operators Bolster Downward Trajectory for US Cable Capex Forecast

StreetTalk – Episode 69: Banks left with pockets full of cash and few places to go

Street Talk – Episode 69: Banks left with pockets full of cash and few places to go

Ad agencies struggle to survive second quarter of 2020


China payments giants may face limited risk, tweak growth plans as US mulls ban

Follow our series previewing the landmark IPO by Ant Group:

Ant-sized transaction margins will not spoil giant IPO valuation

China may seek to raise yuan's stature via a digital avatar

China's startup STAR board will still have a long way to go after Ant's mega IPO

Ant Group's close ties with Alibaba to endure post-IPO

China's leverage caps on microlenders bring Ant's regulatory risk to forefront

China's Ant Group may seek clear blue skies in Southeast Asia to grow via M&A

Ant Group's lack of strong messaging platform concerns investors as IPO looms

Bank disruptors doubling down on mobile payments in China

Ant Group Co. Ltd. and Tencent Holdings Ltd. are likely to face a limited earnings impact as Washington is reportedly exploring restrictions on their mobile payments platforms in the U.S., although the Chinese companies' overseas expansion strategies may lean more toward Southeast Asia and other emerging markets going forward.

Senior American government officials discussed on Sept. 30 the possibility of curbing Ant's Alipay and Tencent's WeChat Pay in the U.S., Bloomberg reported Oct. 8, citing unnamed sources. The officials are reportedly concerned about national security if China were to gain access to banking and customer data in the U.S. via those payments platforms. Bloomberg's report did not provide further detail about the discussion and said it was unclear whether the potential ban was shared with President Donald Trump. A final decision is unlikely to be imminent, the report added.

"Payments is a very sensitive space," Zennon Kapron, director of Singapore-based consultancy KapronAsia, told S&P Global Market Intelligence. "However, the way the U.S. government tends to enforce any kind of control of monetary actions is limited to the access to the U.S. dollar. You wonder where the point of control would be for the U.S. government in terms of limiting these players."

The news comes as Ant Group, 33% owned by Alibaba Group Holding Ltd., is preparing for what could be the world's largest initial public offering, expected to take place in Hong Kong and Shanghai simultaneously in the fourth quarter. It would also be Washington's latest attempt to take aim at Chinese companies such as TikTok Inc. and WeChat, in which WeChat Pay is embedded, on national security grounds.

Ant Group said in an emailed statement to Market Intelligence that it was "unaware of any such discussions within the [U.S.] administration. Ant Group's business is primarily in China and we are excited about our growth prospects in the China market."

Tencent said it had no comment.

Limited earnings impact

Because all users of Alipay and WeChat Pay are required to have an account or a card with a bank in mainland China or Hong Kong, the payments companies' overseas platforms primarily serve Chinese tourists or students abroad, as well as small foreign businesses that trade with China.

"Overseas exposure for both Alipay and WeChat Pay is immaterial," Billy Leung, Hong Kong-based director of Equity Research at Haitong International Securities, told S&P Global Market Intelligence.

He added that "monetization" of their businesses outside China is "limited," noting that their high-margin products such as microloans and insurance policies are only offered to domestic users in China. Ant said earlier these products generated more revenue than payments processing during the first six months of 2020.

Both Ant Group and Tencent declined to disclose their user number and revenue from the U.S., but the companies' recent disclosures indicate their operations in the U.S. are relatively small.

Ant Group's preliminary IPO document shows that in the six months ended June 30, the company's revenue from outside China totaled 3.21 billion yuan, or 4.4% of its total revenue of 72.53 billion yuan. Revenue from the U.S. was a "very, very small" proportion of the company's total overseas income, a person familiar with the situation told S&P Global Market Intelligence.

According to Tencent's first-half earnings report, the U.S. accounted for less than 3% of its 1.21 billion users globally of its two messaging apps, WeChat and Weixin. Revenue from the U.S. was less than 2% of the company's total income in the same period.

Focus on emerging markets

While mainland China remains the biggest revenue contributor for Alipay and WeChat Pay, both platforms have been expanding overseas in recent years. However, due to elevated tensions between Washington and Beijing, analysts noted that the U.S. market has not been a high priority for either expansion strategy and will remain so for the foreseeable future.

"The U.S. payments market is very crowded. There is Apple Inc. and many other credit card networks," Kapron said. "Even before this news, I didn't see the U.S. as a high priority in their expansion plans."

Ant Group, which began in 2004 as Alibaba's payments platform, has made considerable investments in Southeast Asia, where local governments are welcoming and which offers a potential customer base that is young and tech-savvy with rising personal incomes.

"I think they would like to go to Southeast Asia and other emerging markets first," said Chelsey Tam, senior equity analyst Morningstar in Hong Kong.

Tencent announced Sept. 15 that it is planning to build a regional hub in Singapore to serve Southeast Asia and beyond, a decision taken against a backdrop of geopolitical tensions that have forced some Chinese companies to amend growth plans in key markets such as the U.S. and India.

A U.S. federal judge in September issued an injunction against President Trump's executive order to effectively ban WeChat from operating in the country. Another person familiar with the situation told S&P Global Market Intelligence that Trump's order would have prohibited payments between merchants and individuals on WeChat Pay in the U.S. but not payments between individuals on the platform.

Impact on Ant's mega-IPO

Ant IPO plan is pending approval from Hong Kong stock exchange authorities for the new-share offering that could reportedly exceed Saudi Arabian Oil Co.'s $29.4 billion IPO in 2019.

"[A ban by Washington] would have affected the IPO more if Ant was going to list in the U.S.," said Elaine Yao, senior manager of financial services at Capgemini Invent in Hong Kong. "Investors here are more interested in its outlook in the Asia-Pacific region."

Bruce Pang, Hong Kong-based head of macro and strategy research at China Renaissance, said investors are more focused on the growth potential of Ant's nonpayment businesses, such as wealth management and insurance broking, which is "more lucrative" than payments and has a leading position compared to other platforms in China.

However, Michael Chang, director of Hong Kong and China financials, equity research at CGS-CIMB Securities, sounded a note of caution, whatever the final decision. "It does curb the future offshore growth potential of these payments companies though, especially if rising geopolitical tensions results in not only the U.S., but other countries considering restrictions."

As of Oct. 7, US$1 was equivalent to 6.79 Chinese yuan.