Deal focus: IDG backs Circle's payments play

When US-based financial technology start-up Circle first started planning its entry into China, management knew they were in for a tough fight. The company's online money transfer system would be going up against well-established homegrown players like Alibaba Group and Tencent Holdings. Compared to these Circle's technology is in its infancy.

"We have taken great inspiration from China in our thinking about the future of banking and consumer finance," says Circle founder Jeremy Allaire. "Messaging and payments, P2P [peer-to-peer] lending and novel forms of saving and investment, powered by the internet and software, are accelerating at an incredible pace in China, outpacing the West. We all have a lot to learn from innovators in China."

Nevertheless, the company believes that its platform has what it takes to compete, and a group of investors led by IDG Capital Partners and including Baidu, China Everbright, Wanxiang and CreditEase agrees. They recently committed $60 million in financing to support Circle's rollout in China.

Circle's payment technology aims to marry the security that customers need for their financial moves with the convenience they expect from other online services such as e-commerce. The developers want to create a service that can be used on a casual basis by a broad range of consumers - within and between different markets - without the need for the middlemen and transfer fees that they see as archaic.

While this theme of convenience is attractive from a consumer standpoint, implementation with existing technology has been a challenge. Circle believes it has found a way to improve the performance and security of online P2P payments with blockchain technology, which stores a complete record of every transaction on every device connected to the network rather than relying on centralized storage.

Though it is best known as the foundation of the digital currency bitcoin, blockchain has seen considerable interest from financial players worldwide for its potential to provide improved security and record-keeping than current systems. In China, Wanxiang Blockchain Labs, a division of Circle investor Wanxiang Holdings' parent company, is leading a group of 11 regional commodity, equity and financial asset exchanges to create a blockchain protocol for the financial industry.

For its part, Circle's China push will be in the form of an independent company headquartered in Beijing. The company's management hopes that Circle China, formed six months ago with a seed investment from several of the strategic investors in this round, can be more responsive to the needs of Chinese consumers while integrating them into Circle's global platform.

"The coming years will be exciting, transformative and no doubt challenging," says Allaire. "We're taking the long view and trying to build something that can help integrate the global economy and global consumers in the same way that the internet of information and communications has brought the world together."

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• Topics
• Greater China
• North America
• Technology
• Financials
• Expansion
• Venture
• IDG Capital Partners
• Baidu
• China Everbright
• Financial Services
• China