Is Alibaba Targeting The U.S. With Its Acquisition Of “EyeVerify”?

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Recently, Ant Financial, the payments affiliate of Alibaba (NYSE:BABA), acquired EyeVerify, a Missouri based start-up which uses biometric authentication technology for securing consumer’s online data and transactions. This is Ant Financial’s first investment in the U.S. and the company plans to use EyeVerify’s technology to upgrade its own security systems and integrate this technology in several of its products. Alibaba’s payment gateway Alipay is the most important offering of Ant Financial and has nearly 450 million active users, dominating the Chinese payment market. While global expansion has been on Alibaba’s agenda for some time, introducing a product in the U.S. requires not only a better understanding of the market, but the achievement of the quality, security and service standards expected by U.S. consumers. We believe that, as Alipay expands beyond China into regions such as India and Europe (for Chinese tourists), better security features can lead to faster adaption of this product. Once the company establishes trust in regions outside China, Alibaba can eventually look at launching a product in the U.S.

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Building Trust Among American Merchants For Global Growth

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Alibaba is looking to expand Alipay’s services to regions which are popular among Chinese tourists, giving them the convenience and comfort of using Alipay while travelling abroad. The company recently launched the Alipay app in Europe to allow Chinese tourists to use this payment option for shopping and restaurant payments in Europe. While Alibaba is initially looking to launch a similar service for Chinese tourists in the U.S., strong security measures are critical to build trust with American merchants to encourage them to accept payments via Alipay. Chinese tourists to the U.S. are increasing rapidly: in 2019, 3.1 million visitors from China are expected in the U.S., a 173% increase from the 2013 figure. This is a huge opportunity for Alibaba, especially when one considers the follow-on.  Once the company is able to build a trustworthy relationship with American merchants, it can introduce Alipay to U.S. consumers. Ant Financial has a target of 2 billion global customers  in the next five to ten years. Indeed, this number is an ambitious goal, considering that there currently 450 million registered users.  It will be critical in meeting this target to include users from developed nations (including the U.S.) in this global expansion. Alibaba faces tough competition in the U.S. from players such as Apple, PayPal and Google.  Matching their security standards is critical to engage US and European users.

Alipay is an important pillar in Alibaba’s e commerce system.  As an increasing number of users make this their default payment system, the potential for Alibaba in terms of transaction commissions is huge. However, in order to achieve continuous growth, Alibaba has to look at global expansion of this product and strong security features are critical to build trust with global merchants. We believe the acquisition of Eye-Verify is the first step in this direction. As Alibaba looks to eventually introduce this product in the U.S., a strong security system, in line with global standards will be critical for its success outside China.

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