TA sees promise in YeePay's offline offering

YeePay, with just 3.2%, has little chance of supplanting its rivals in the online space. As a result, the company has found itself a niche targeting offline merchants, which between them account for an estimated 20 times the GMV of the online market.

"While e-payment activity is growing from an already large base online, it's still has a rather low penetration offline," says Edward Sippel, TA Associates' managing director and co-head of Asia. "There aren't that many merchants using digital or mobile systems to process payments. Only 10% of small and medium-sized enterprises use payment technologies offline today. We think there are still a lot of opportunities in this space."

Last week, YeePay raised an undisclosed sum from TA and Hong Kong financial leasing business Far East Horizon. It is the company's fifth round of funding, following commitments by a range of VC investors.

YeePay differs from other third-party payment platforms in that it provides customized solutions for each offline merchant. One selling point is that it isn't Alipay. The market leader's core business is to facilitate payment for purchases made on TMall and Taobao. It is less likely to work with merchants that operate outside of the Alibaba universe, and certain merchants prefer to avoid Alipay if another Alibaba entity is in direct competition with them.

YeePay's appeal is therefore its independence. For instance, a commercial bank would prefer to have its own payment processing system because Yu'e Bao, Alibaba's money market fund platform, is luring customers away from traditional banks. It could opt for a customized service provided by YeePay. Online retailers JD.com and VIPshop are also customers.

YeePay's transaction volume last year came to $77 billion, up 100% on 2013. It specializes in certain verticals including airlines and travels, financial services, digital entertainment, fast-moving consumer goods and telecom. Driven by the government's promotion of non-cash payments and rising issuance of debit cards, more traditional stores are expected to install digital systems.

The partnership with TA and Far East Horizon could open the door to global collaborations and local penetration for YeePay. TA has backed online payment operators such as India-based BillDesk and BluePay Processing in the US, while Far East Horizon, which is part-owned by state-owned SinoChem Group, can offer important government relationships and local networks in China.

"It's a very powerful combination for YeePay because we both have very complementary strengths," Sippel says.

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• Topics
• Greater China
• Consumer
• Financials
• Expansion
• Investments
• Venture
• China
• TA Associates
• Consumer
• TMT
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• e-commerce