Who will be the Alibaba of the West in FinTech?

Ant Financial, the digital payments arm of Chinese e-commerce giant Alibaba, has announced its intention to acquire venerable US money transfer company MoneyGram for a bit under $1 billion, pending regulatory approval. This reminded me of a recent meeting I had at a leading digital consulting firm, when the conversation turned to the topic of what company will be the Alibaba of the West (for those of you who have not been keeping close tabs on developments in the wild, weird, wonderful world of the Chinese internet, China has the world’s largest and, by many measures, most advanced internet economy – certainly when it comes to the sophistication and adoption of consumer-focused FinTech services like digital payments). Who would succeed in replicating Alibaba’s model in mature economies like the US – would it be Apple? Facebook? Google? Or some startup few have heard of that will become a household name in 18 months’ time? My response, only partially in jest, was that the company most likely to become the “Alibaba of the West” may well be Alibaba. In light of the proposed acquisition of MoneyGram, this scenario no longer feels even partially risible.

Certainly it should not be taken as given that China’s internet giants will be able to replicate their success in Western markets. Expansion into, say, the US would require overcoming considerable obstacles such as significant differences in culture and consumer behavior, not to mention the current rising wave of protectionist sentiment, particularly regarding China. But there are good reasons to believe that much of the business model pioneered by the likes of Alibaba and Tencent (which have used the scale and established user bases of the massive multi-purpose mobile platforms they originally built for chat, social networking, or e-commerce purposes services to extend into horizontal services like payments) can be successfully replicated outside of their home market.

Indeed, there are signs that US companies such as Facebook are moving in precisely this direction. But it’s far from clear that Facebook would emerge the victor from a race against Alibaba or Tencent to become the dominant US platform for FinTech services such as digital payments. The digital economy is dominated by all-powerful network effects, a fact that goes a long way towards explaining the meteoric rise Facebook, as well as other digital platform leaders such as Amazon, Google, Uber, or Airbnb. However, network effects aren’t necessarily transferable from one part of the digital ecosystem to another – just look at Google’s repeated failures to launch a successful rival to Facebook’s social network. If Facebook goes head-to-head with Alibaba and Tencent in consumer FinTech, who’s to say it won’t end up with a Bing or a Google+?

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