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PARIS: China’s Ant Group may have suffered a setback with the filing of its IPO, but European banks remain suspicious that Chinese tech giants will soon be their main competitors.
In recent years, the European financial sector has seen the rise of a large number of startups, called fintech, that have sought to disrupt traditional banks by offering digital services.
While they have yet to really threaten established banks, fintechs have forced them to dust off their operations and invest massively to provide similar digital services.
“The real competitor of tomorrow will probably be GAFAM or the ants of the world, who have the capacity to invest considerable sums,” said the director of France’s Societe Generale bank, Frederic Oudea, recently, using a French acronym for Google, Apple, Facebook. . , Amazon and Microsoft.
The US tech giants have made more beachheads in financial services, an area where their Chinese rivals are already well advanced.
READ: Ant Group fiasco reflects battle for China’s financial soul
FROM CHAT TO THE SUPER APPLICATION
Ant Group, which had hoped to raise a record $ 34 billion from its initial public offering before the Chinese government dumped the deal, owns Alipay, a payment platform that is now an unavoidable part of everyday life. in China.
Its main rival in China is WeChat Pay, owned by Internet giant Tencent.
“Companies that originally developed chat software have a strong interest in improving these activities, as they allow them to cover an even wider range of people’s daily activities,” said Christopher Schmitz, financial technology expert at Ernst & Young.
“Gradually more and more of people’s spending goes to these companies,” he added.
The Chinese have widely adopted payment by displaying vendor QR codes on their smartphones using Alipay or WeChat Pay due to its convenience.
Alipay alone has 731 million monthly users.
In just a few years, these two platforms have transformed China from a country where cash was king to a society where smartphones are the preferred means of payment.
These companies are not content with offering payments. They offer more financial services, including the ability to get a loan with just several clicks.
“Alipay generates more income from the financial services it offers, such as investment plans and loans, than the payments themselves, which is really just the tip of the iceberg of what has become a super application,” said Adrien Boue , e-commerce market consultant.
He said that “the goal is for users to stay in the application for as long as possible. From morning to night, there is always functionality there: talking with friends, ordering a taxi, ordering food and even working on collaborative projects.”
CULTURAL BARRIERS
“The most advanced model in the financial sector is China,” Oudea said.
The question is how much of this model can be replicated in Europe, especially after the Ant Group’s IPO setback, which some observers see as a move by the Chinese authorities to put a company too ambitious.
“Our banks are still a bit protected,” said Julien Maldonato, a financial services expert at consultancy Deloitte France. “There are still cultural barriers, but they won’t protect us forever.”
One of those cultural barriers is QR codes.
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“In Europe, QR code-based payments are not very popular,” said Ernst & Young’s Schmitz.
The fragmented nature of Europe with its different languages and cultures also makes it difficult for an outsider.
But Maldonato noted that US tech companies are already very much a part of Europeans’ everyday lives, and China’s TikTok has attracted young users who are “the banking clients of tomorrow.”
It’s the ability of Chinese companies to invest money in developing new technologies and acquiring customers – each of them plans to invest around $ 70 billion over the next five years – that could really change the game.
“That worries Americans that they will also accelerate” their investments, Maldonato said, while European companies will have trouble reaching even a few billion.
