SmartPay joins Ping An’s e-payment push

SmartPay, the group's most recent acquisition, sets the scene for a challenge to Alipay, Alibaba's market-leading third-party payment platform. Offering clear synergies with Ping An's core financial services business - it has bank and asset management interests as well as being China's second-largest life insurer - SmartPay is unlikely to be exited as quickly as Yihaodian.

Indeed, the group is expected to make other investments in the space, as it aggressively pushes into electronic services. Ping An's mobile integrated terminal (MITs) system already allows insurance policies to be sold, underwritten and paid for in just one client meeting. More than RMB70 billion ($11.4 billion) in premiums have been processed through MITs since 2011.

"Payments is a huge opportunity, especially for merchants with their own sales force and transactions," an industry source told AVCJ.

The SmartPay acquisition facilitated the exit of Lunar Capital and co-investors RRE Ventures and Icon, based in the US and Sweden, respectively. The company was created in 2003 as a spin-out from Linktone, a wireless value-added service provider co-founded by principals at Lunar Capital that went public on NASDAQ in 2004. It was one of a handful of tech-related assets in the China-focused private equity firm's debut fund.

RRE Ventures' early involvement derives from its financial services experience. The US-based firm's managing partner, Jim Robinson, is a well known investor in the payments field while his father and co-founder, who is also called Jim Robinson, was previously chairman and CEO of American Express. Its portfolio companies include mobile payments platforms Payfone and Boom.

A sale to a financial institution or a merchant - such as an e-commerce platform - was always likely for SmartPay. A number of independent third-party payment platforms in China have struggled in recent years with the rise of Alipay and domestic banks aggressively entering the market.

SmartPay is understood to process nearly RMB10 billion per year and is reportedly profitable, although it remains a fraction of Alipay's size because it focuses on payments transacted via mobile phones. Alipay is more broadly exposed to online payment, receiving transaction fees from Tmall and Alibaba.com.

As early movers in the payment space, SmartPay and Alipay are the only industry participants that can boast a full set of licenses, enabling them to run payment services, operate online and perform a custodian and processing role much like a bank. This is a significant issue, now that third-party payment is subject to closer regulatory scrutiny and approvals are not easily obtained.

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• Topics
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