Is Ant Group a real threat to Western payment duopoly Visa, Mastercard?

“If the banks don’t change, we will change the banks,” Jack Ma, the founder of Alibaba and the richest man in China, famously said in 2011.

A decade later, the Ma-controlled fintech company Ant Group is doing precisely that.

The firm is preparing to go public as early as next month. The mammoth dual listing in Hong Kong and Shanghai is reportedly planning to raise roughly US$30 billion, which would catapult Ant Group’s valuation to a whopping US$225 billion. That’s more than twice the market cap of Wells Fargo and triple that of Goldman Sachs.

Photo credit: Ant Group

Behind the astounding growth of Ant Group are technology infrastructures and capabilities that seem more scalable than those of Western payment networks.

Though most of its billion-plus user base is in China, the company has been plotting its global expansion to Asia and Europe by partnering with local financial services providers and offering technologies that promise higher efficiency and security.

While the Alibaba fintech affiliate’s plans may face some barriers in developed markets dominated by Visa and Mastercard, the tension is set to rise as the company inches into the incumbents’ turf.

Visa, in response to Tech in Asia’s queries, says it’s aiming for a collaborative approach. “While many see new entrants and incumbents be in direct competition, Visa believes that new players and incumbents each have something to offer the other,” a company spokesperson said.

In the Asia Pacific, Visa has partnered with more than 20 wallet services, reaching more than 1 billion users and more than 65 million merchants.

Intensifying friction

Ant Group’s IPO filing shows why it’s on the up: Its technology benchmarks seem to compare favorably against Visa’s and Mastercard’s.

These seemingly impressive figures should perhaps be taken with a grain of salt given that many of Ant’s transactions are pre-orders, and transactions on Visa tend to be much higher in value.

However, this could indicate that Ant’s technology infrastructure is more robust than traditional payment processing companies like Visa and Mastercard.

As recent as 2018, Visa’s payment network collapsed due to a technical failure, which affected more than 5 million transactions across Europe during a 10-hour outage.

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