TA Associates, Far East Horizon back China’s YeePay

Founded in 2003, YeePay provides online and offline services that enable consumers and businesses to make and receive payments via the internet and mobile devices. It has more than 93,000 active merchant customers and processed $77 billion in transactions last year, a 100% increase on 2013.

The company was among the first to receive a nationwide payment license from the People's Bank of China and now has over 100 commercial banks in its network. YeePay is also licensed by the banking and foreign exchange regulators to conduct mutual fund-related and cross-border transactions. It focuses on sectors such as airlines and travel, financial services, digital entertainment, fast-moving consumer goods, and telecom.

"YeePay offers a number of very compelling investment attributes, including a diversified customer base featuring some of the leading brands in China, an attractive recurring revenue model and an experienced management team," said Edward Sippel, TA's managing director and co-head of Asia, in a statement.

According to AVCJ Research, this is the company's fifth round of funding. In 2003 it won backing from Mobile Internet Partners Asia before DragonVenture and Draper Fisher Jurvetson ePlanet Ventures came in the following year. IBM Venture Capital Group was the sole participant in another round in 2005 and then DFJ and DFJ DragonFund returned in 2006 alongside Intel Capital and W.R. Hambrecht & Co.

China's third-party payment industry has saw compound annual growth of 54.1% between 2011 and 2013 and is forecast to expand by 40.1% during the four years to 2017. Total transaction volume reached $3.2 trillion in 2013 and is expected to amount to $12.4 trillion in 2017, data from consultancy iResearch show.

Key growth drivers include rising issuance of bank and credit cards, increased consumer spending, expansion in online and mobile payments, and government promotion of non-cash payments. TA anticipates considerable upside as payment providers penetrate the small and medium-sized enterprise (SME) segment, where only 10% of operators have a non-cash point-of-sale payment solution.

Industry performance since 2011 suggests that leading players have not suffered since the introduction of licensing and tougher regulatory requirements for non-bank payment service providers. It was also decreed that foreign investors could not use the variable interest entity (VIE) structure - popular among VC firms that want to participate in areas of China's economy where direct offshore ownership is prohibited - in the payments space.

YeePay had a 3.2% market share by gross merchandise volume as of in the third quarter of 2014. The industry is dominated by Alibaba Group's payment platform Alipay, which has 49.2%. Tencent Holdings' Tenpay and China UMS are in second and third place, with 19.4% and 11.6%, respectively.

TA makes growth-oriented investments globally and has backed more than 450 companies. In the payment space it has also supported India-based BillDesk and BluePay Processing in the US.

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• Topics
• Expansion
• Financials
• Technology
• Greater China
• TMT
• Financial Services
• China
• Growth capital
• TA Associates