Tencent’s Afterpay play could provoke US giants
On Wednesday night, Martin Lau, president of China’s internet giant Tencent, briefed investors on the impact COVID-19 is having on one of the world’s most innovative and ambitious technology companies.
With Chinese citizens locked down because of the coronavirus, Tencent’s quarterly earnings beat expectations as its social media, gaming and streamed media content was consumed by 1.2 billion users of its WeChat mega-app.
But it was Lau’s thinking on the virus’ impact on the e-commerce behemoth’s payments strategy and its engagement with China’s massive retail sector that was striking, given Tencent’s $300 million acquisition of a 5 per cent stake in Afterpay a fortnight ago.
The move onto Afterpay’s register – which helped its shares return to record-high levels on the ASX this week – was in part a response by Tencent to Ant Financial, a key competitor, which recently bought a minority position in Klarna, a European buy now, pay later giant and one of Afterpay’s main competitors in the US. But both deals reflect the China fintech giants’ desire to play a bigger role in the global payments system, where revenues are expected to hit $3 trillion by 2025, according to McKinsey.
With the United States and China embroiled in a trade dispute, the push by Afterpay and Klarna to compete with US banks and card giants Visa and Mastercard for the attention of US retailers is set to come under scrutiny, as the US financial industry’s lobbyists bring the Chinese minority equity stakes to the attention of the powers that be in Washington, and hardline Texas senator Ted Cruz takes aim at Tencent.
“Afterpay is now in a ‘dance of the elephants’ – and they are a small mouse,” says Grant Halverson, CEO of McLean Roche, a payments consultancy.
“So they had better remain very aware and quick and fleet footed, or they could get squashed.”
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