Alipay’s latest expansion — this time, to Luxembourg — shows not only the increasing reach of the China-based mobile payments ecosystem, but also stands as the latest example of companies in payments and FinTech gaining licenses to operate in Europe. There, PSD2 was designed to encourage FinTech and payments innovation.
Alipay, which is part of the Alibaba group and has more than 700 million users, reportedly received a license from Luxembourg for a new entity called Alipay (Europe) Limited S.A.
According to the report, “Alipay’s new PSD2 license in Luxembourg will allow the group to leverage the EU passport to serve its customers across Europe in the future and connect Chinese users with merchants in EU countries.”
News of the new Alipay license to operate in Europe comes as a new survey provides evidence of how desirable mobile payments are to Chinese tourists. The proliferation of mobile payments has helped to increase sales for local merchants, the survey noted. Seventy-one percent of Alipay-adopting sellers said they would recommend its usage to help sales.
Alipay follows other payments players, along with FinTech startups, that have recently been granted licenses to operate in Europe.
One of the more recent examples comes from London-based financial technology startup Revolut, which is reportedly “the first London-based FinTech to receive a European banking license.” According to that account, “the Bank of Lithuania, the eastern European country’s central bank, granted Revolut the regulatory approval that gives it permission to operate throughout the European Union.” Revolut plans to offer digital checking and savings accounts, as well as lending, to consumers and businesses.
Monzo, a U.K.-based, mobile-only “challenger” bank, reportedly sought regulatory approval to operate in Ireland as part of an effort to “take advantage of so-called ‘passporting’, a European-wide arrangement that sees similar regulation mirrored across the European Economic Area’s 27 member states, helping to create something akin to a single market for financial services.” Starling Bank undertook similar steps.
Monzo recently achieved a valuation of $1.3 billion, making the startup the most recent in a string of U.K. banks that have achieved “unicorn status,” which happens when the company has a valuation of $1 billion or more. Reuters noted that the bank, which launched in 2015, isn’t profitable. The company said its capital value has jumped from 280 million pounds in 2017.
Even with the recent moves from Alipay and others in European payments and FinTech, there is significant uncertainty about what’s coming down the road. That’s because of Brexit — more specifically, the uncertainty about how the U.K. will handle its exit from the European Union (assuming there is no do-over vote).
The prospects of post-Brexit passporting remains unresolved, as the “single market” in the EU would be no more, and banking and financial services would no longer be able to make the leap from country to country. FinTech, by some estimates, and as noted by Forbes late last year, represents as much as 10 percent of the U.K.’s GDP, and provides employment for as many as 1.9 million people.
That uncertainty comes at a time when FinTech and banking apps are getting stickier. For example, in 2018, U.K. consumers checked their mobile banking apps on average more than seven times a week. That not only demonstrates the power of digital technology, but also signals that traditional financial institutions there face tremendous pressure to “maintain their relevance in the face of FinTech competition,” according to a new report from App Annie.
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