Industry Trend Analysis - Control Over Payments Strengthens Alibaba's Position - 01 MAY 2017

BMI View: Alibaba's acquisition of Lazada's online payment service HelloPay Group confirms our view that the Chinese giant would spur consolidation in the e-commerce and MFS sectors in Southeast Asia in 2017. Its strategy of gaining control of both the online marketplace as well as the payment service provides strengthens its position and will make it more difficult for Amazon once it enters the region.

Ant Financial, Alibaba's financial arm, announced it was merging with HelloPay Group, the company operating Lazada's online payment platform. This comes one year after Alibaba's USD1bn acquisition of online marketplace Lazada, which operates across Southeast Asia (SEA). The merger will result in HelloPay rebranding to Alipay in the markets in which it is present - Singapore, Malaysia, Philippines, and Indonesia.

This move solidifies Alibaba's footprint presence in SEA's e-commerce market and confirms our view that Alibaba would spur consolidation in Asian markets ( see 'Alibaba To Accelerate Consolidation In Fragmented Markets', November 2 2016). It forms part of Alibaba's strategy to take control of both online marketplaces and payment services in order to position itself in overseas markets. Ant Financial's Alipay payment system leverages robust experience, with over 450mn users, and sophistication in terms of security, strengthening HelloPay's service. With Ant Financial taking charge of HelloPay's operations, the rebranded service will continue to provide payment solutions on Lazada's platform with the same features. In markets where consumers still rely heavily on cash, Alipay will provide strong support to convert consumers wary of hacking to online payments, from Lazada's current cash-on-delivery option.

Indonesia Offers Immense Opportunity
SEA - E-Commerce Market Value (USDmn), 2016-2020
e = estimate; f = forecast. Source: BMI

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