Related articles:

• Ant Financial Is 3 Platform Business Models Combined. (Jeff’s Asia Tech Class – Daily Lesson / Update)
• Ant Financial’s Big Money is in Asset-Light Credit Tech (Jeff’s Asia Tech Class – Daily Lesson / Update)

From the Concept Library, concepts for this article are:

• Digital Economics: Bundling
• Payment Platforms

From the Company Library, companies for this article are:

• Ant Financial / Alipay+
• Stone
• Square

Photo by Markus Winkler on Unsplash

————-Transcript Below

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Welcome welcome everybody. My name is Jeff Towson and this is the tech strategy podcast where we dissect the strategies of the best digital companies of the US and Asia and the topic for today Alley pay plus and aunt group 2.0 as I’m calling it And this is about arguably one of the most, if not the most important digital financial services company on the planet, previously called Ant Financial, then Ant Group, also Alipay. Well, the rumor is they’re going public again. It was sort of reported by Reuters and then it was immediately contradicted by the regulatory group in China and then it was sort of refloated again. It’s a rumor floating out there. that they went quiet a couple years ago. They were all primed up for IPO. We got some great information from them. Then there was a bit of a government issue. They pulled that back, been quiet for a year or two. Well, rumors are they’re maybe heading towards an IPO right now, so I’ll talk about what that might mean. And Group 2.0 basically. And then something that’s definitely not just a rumor, which is Alipay Plus, which is their new international initiative. Several months they’ve been rolling this out. I mean it’s been piloted for a while a year plus, but really the last six months It’s been popping up across Asia bit into Europe Really interesting and generally any time aunt does anything I pay attention because in terms of digital strategy, which is what I do They are as good as it gets they are incredibly good at this. So Haley pay plus You know very clever strategy and I’ll talk about what they’re doing. And that will be the topic for today. For those of you who are subscribers, I sent you some stuff about Ali Play Plus already. I’m also gonna touch on Stone, which is a Brazilian company that has a lot of similarities to what Ant is doing right now. You can find articles on that. Those are both under the company library on the webpage. And for those of you who aren’t subscribers, you can go over to jefftowson.com, sign up there, free 30 day trial, see what you think. Okay, let me do my standard disclaimer here. Nothing on my podcast or in my writing or on the website is investment advice. The numbers of information from me and any guests may be incorrect. The views and opinions expressed may no longer be relevant or accurate. Overall, investing is risky. This is not investment advice. Do your own research. And with that, let’s get into the topic. Now the two concepts for today are pretty simple. We’re just gonna talk a bit about payment platforms because that traditionally has been the foundation for what Ant does domestically. And in the past, what they were doing internationally, although that’s now changed. And that’s also what we’ve seen in other sort of, let’s call it digital banks. Definitely New Bank in Brazil is similar. Square in the US, all of them. were built on payment platforms originally. That’s how they built their network, connecting people for payments. And then from there, they went into services. So a company like Square, they kind of went into some more financial services, for micro merchants, a company like New Bank, they basically became a digital bank and they are fairly similar to what Ant 1.0 was doing. And let’s say Stone Company, Stone Limited, the Brazilian. company, they really shifted from doing financial services payment into merchant services, which is a little bit like Alipay, Alipay Plus. Anyways, I’ll go into all that. But basically, payment platforms is concept number one for today, the other concept is just bundling, which it’s, if you go on the concept library, if you look under platforms, you’ll find payment platforms. If you look under digital economics, you’ll find bundling. You know, if you’re gonna do anything digital, you gotta understand sort of the basics of digital economics, also called information economics. Compliments, things like bundling, pricing and versioning and all this. Well, bundling is, you know, it’s pretty straightforward. You take two products and you wrap them together and you sell them for one price and it’s a common. tool that we see in software from literally the first day software was created. Let’s bundle software together because the marginal production cost is usually zero. So it’s often very very cheap just to bundle stuff together. And we see Amazon and other things companies like Adobe do this. It’s very common. Anyways that’s going to be a big part of what Alipay Plus is doing. And I’ll talk about that. So those are the two ideas for today. They’re listed in the bottom of the show notes as always and you can find them on the concept library on the web page. If you wanna dig into more, there’s quite a bit about both of those at this point. Okay, now the IPO rumor, I mean, it was on Twitter and it was just bouncing back and forth. There was Reuters and a couple others said, Ant had been accepted for IPO filing, which wasn’t the same as approved with the Chinese regulator. And then it was like, oh, no, no, no, that’s not true. And then it came back again. It was bouncing around for a couple of days that maybe this is happening. I think it’s definitely gonna happen. I mean, it’s just a matter of when. And I think we kind of know what major digital companies coming out of China are going to do if they are all, let’s call it politically sensitive, which financial services absolutely is, which is they’re gonna list domestically and they’re gonna list in Hong Kong. Right, that’ll be the playbook. There’s no reason for them to be listing in the US. Well, there’s reasons, but there’s nothing that’s gonna convince the government. And these are considered somewhat sensitive. And now that the status of Hong Kong has changed, I think that’s where the international listings for most companies are gonna go. And then they’ll probably do a domestic listing as well. We’ll see what’s what, but I think that’s what’s gonna happen. Okay, so that rumor’s floating around. We go back, you know, right before their IPO. We got their big filing prospectus, which was awesome. It was like some of the best reading ever. It was some of the best thought out strategy. I wrote a lot about this. You can just go onto my website and type in Ant, and you’ll see my take on this, which, I mean, I’ll pat myself on the back. I think it was far better than what their investment bankers wrote, in my opinion, but maybe you disagree. But basically, You know, Alipay Plus got built on the e-commerce business. That gets pulled out of Alibaba at a certain point, becomes a separate company. There was a lot of sort of criticism of this, where, you know, if you were a shareholder in Alibaba, this was before the Alibaba IPO. If you were a shareholder in Alibaba, like SoftBank, like Yahoo, and then… you know, a major asset gets pulled out and goes under a separate company, they rightfully complained. And this was a bit of a, little bit of a black cloud when Alibaba went public, this idea of what happened with Ant. Although it was called Alipay more than anything back then. My take on that is somewhat different, because you could say, oh, maybe, you know, they didn’t treat those shareholders right. You can make that argument, a lot of people did. I would argue it’s kind of the other way around. If you look at how those original shareholders that were complaining treated Alibaba back in 2000, 2001, 2002, when Alibaba was doing its first couple rounds of financing, they did one out of Hong Kong and then they did one with SoftBank and then Yahoo gave in. I mean they basically diluted out the founding management team within like the first 24 months of that company. brutal treatment, I think a really terrible treatment of people like Jack Ma and Josiah Where you know they were down to I think 15 to 20 percent ownership altogether everybody within 24 months of founding So, you know the same people are then our like oh you’re kind of abusing us if you believe that’s true or not It’s like dude you kind of abused me know who’s calling who what here? You know, so you could consider that payback or just, or the way I would look at it, just tough business practices, tough negotiation, tough business practices. And anyways, there was all that floating around, but then you have Ant sort of pulled out, they’re a payment platform sitting on top of e-commerce, Taobao, Tmall, they start to build from there into credit. And so really their first business model, my simple takeaway for all this, if you haven’t read it, because I’ve said this several times. Ant Financial 1.0 pre-IPO, before it got pulled, was three complimentary platforms with four network effects. That’s my summary. The first platform was a payment platform between merchants and consumers, which had multiple network effects, because you have a indirect network effect between the merchants and the consumer paying, but you also can send money consumer to consumer. So that’s another direct network effect. And then you can actually send money merchant to merchant, another network effect. Payment platforms are very powerful ways to build network-based businesses because they’re inherently viral. You send someone money, they sign up so they can get the money. It’s a really good way to build a network is with a payment platform. So that’s what they had. And then on top of that, they started layering credit services. So you offer credit to the merchants who are on your payment platform, supplier credit, and then you offer credit to the consumers, buy on credit, buy now, pay later, and they basically did microcredit. And we saw the exact same playbook with Square. They did the same sort of payment mechanism platform first with these micromerchants in the US, and then they started offering in credit on top of that, which would be a service on top of the platform. Now. Most companies that do this, they provide the credit themselves, which means you have to raise capital, deploy the capital as the digital platform, or you have a partner, which is kind of what Square did. Ant took that further and they basically brought on about 200 Chinese banks and other institutions to provide the credit. They would then do the matching with the consumer or the merchant and most of the credit would then sit on the books of the partner. So they brought them on as a different user group. They didn’t provide the service directly themselves, which is the issue the government had with what they were doing. Although they did have their own digital bank license at that point and they did act as a bank as well. But they were different than what we’ve seen at New Bank or Square where they didn’t provide the credit themselves. But the basic idea was the same. Payment platform is the foundation. You start putting credit services on top of that. That’s platform number one. Platform number two, which has since sort of gone away, was basically Ulema, which is daily life services, order of food, restaurant reservations, movie tickets. I mean, this is Maytwan. This is Gojek. That platform, which it is marketplace platform between merchants and consumers, that had sort of been floating around Alibaba for a couple of years. It used to be a separate, you know, separate division. It was competing with Maytwan. They pretty much got beat. They moved it into Alipay at a certain point. And the argument is there’s not a lot of money in this, but there’s a lot of engagement and there’s a lot of data. So it’s a very good complimentary platform. I believe they’ve now moved that out of Ant entirely and it’s a separate thing now. So it’s always sort of been looking for a home within Alibaba. And then the third one, which is the more compelling one, is a marketplace platform for wealth management products. You know, we connect consumers with mutual funds, wealth management products, and you can buy them like a marketplace. The benefit of that one is it gets you access to large money. You know, their money market fund is hundreds of billions of dollars because these consumers have tons of money. The weakness is people don’t really buy those things very often. You know, most people don’t buy insurance or they don’t buy mutual funds that often. So it’s… It’s almost impossible to build a standalone marketplace platform for wealth management products because you just don’t get enough engagement. But it works very well as a complementary platform. So anyways, one, two, three platform business models. That’s Ant 1.0. I’ve talked about this before. If you want to see, I have graphics for it. You can look it up. Okay, so that was kind of interesting. But then the government stepped in, pulled the IPO. And basically, there’s been quite a bit of restructuring between the government and, and, we don’t, I don’t really see great information on what’s going on, but we do know a couple things. We, you know, we do know that the government did not want them to just be issuing credit as an intermediary, taking a technology fee, and then passing the credit off to a bank, which is basically almost like securitization, which is what got the US mortgage business into trouble. And so Ant had to look a lot more like a bank. If you’re gonna make loans, credit, you’ve gotta look like a bank, hold it on your balance sheet. I think the last number was 25, 30% has to be on the balance sheet. It was restructured into a holding company. And they have a couple partners now, which are basically state-owned entities. So it’s now, it looks, and then of course they have a banking license. So it looks a lot more like. a Chinese bank than a technology platform in many ways, in that there is significant state ownership, which is what we see in most all of the banks. It has a balance sheet that looks more like a bank than a pure technology company. And that is really not surprising. You can go back 10, 15 years, and there’s just been, we used to talk about this a lot in 2008, 2009, where, The big issue in China, one of the biggest issues was shadow banking. And people talk about shadow banking because it’s kind of a cool phrase. It’s like ghost cities. It’s kind of makes it sound sexier than it is. And basically shadow banking is any sort of lending that’s happening on it outside of a traditional bank. So, you know, this used to happen in Taiwan. This just happened in a lot of places in Asia, like jewelry stores used to make loans in Taiwan. you know, Wuhan, Wenzhou. Wenzhou was famous as a city where something on the order of half of the families in Wenzhou were doing private lending of some form. So we’ve kind of seen this sort of non-traditional lending. And at a certain point, 2008, 2009, about 50% of all loans debt in China was coming from shadow banking, i.e. not the traditional banking sector. which is largely state controlled, four to five major state-owned banks, ICBC, Bank of China, Bank of Communications. Now we’ve got a couple more private banks since then. And the government identified that as one of the biggest single risks to the country was the shadow banking. And they really didn’t like it, but there was also a recognition that this wasn’t just people profiteering, there was a lot of people needs being unmet. Private businesses, it’s very hard to get a loan in China from a bank. And small merchants, SMEs forget it. The state-owned banks mostly have always loaned to other state-owned companies because they’re kind of set up to do that. They feel secure in it. They have the capabilities to analyze it. They don’t really have a lot of the capabilities to make loans to private entities where collection can be difficult. Data is hard to get. There weren’t credit scores in China until just recently. So they really struggled to do any of the private lending. And what you would often do is if you’re a private business and you go to a bank in China, you have to basically put up personal collateral and you’re not gonna get more than a 12 month loan. So there was a lot of problems in private lending in China for a long time. Anyways, against all that backdrop, big surprise, everything we’re hearing is that Ant 2.0 is gonna be a partnership, a holding company with significant state ownership. Again, and I think this is to keep it more like how China has operated with banking and not shadow banking type behavior. I wrote a book a couple years ago called the One Hour China Consumer Book, which I thought was quite good. And then actually I make fun of it because I say it doesn’t sell. It actually sold alright. But we looked at how to think about the role of the state in various businesses in China. And the phrase we used was, if you have an attractive business with competitive strength, competitive advantage, it’s going to sit in one of two buckets. It’s going to have, it’s going to be an industry with a very minor role for the state. restaurants. State is not involved in China and restaurants beyond normal health and safety. We call that giants and dwarfs because if you have strong competitive advantages, no significant role of the state, the industry is gonna look like a couple giants and a bunch of small companies. The other version we talked about was called giants, dwarfs, and the state. Where we’ve got some large companies, we got a bunch of small companies, and then we have the state. which is acting as a player on the field, as well as the referee. And in those industries of which banking is one, automotive is another, telecommunications is another, mobile is another, aerospace is another, there’s a lot of businesses in China that fit this category. Significant role of the state, competitive advantages. This can be one of the most profitable places to be. tremendously profitable. But you have to understand the game you’re playing, and the game you’re playing is find out what the government wants to achieve and do everything you can to help them. That’s the game. Find out their interests, help them. A lot of real estate companies do this. So anyways, you can kind of see that that’s where this is all going. And I think that’s actually fine. If you understand what you’re looking at, there’s nothing wrong with this. And actually, I think it’s quite prudent. I am very suspect of a lot of consumer finance and a lot of stuff that happens. I think it’s a lot of cowboy activity. I think it can be fairly abusive to poor and unsophisticated borrowers. So I’m not a big fan of a lot of, so I actually, now it doesn’t mean I want this model, but I can understand that there are problems there. Okay, so that’s kind of the area you got. And then the other. issue that’s floating in here. So I’m teeing up sort of issues that I think are significant in Ant 2.0 domestically. That’s kind of what I’m doing here. The other issue floating in this is the Chinese digital yuan, the eun, the idea of a centralized digital currency, which China is without question the most aggressive country doing this. they are rolling out a digital currency, a crypto currency. And it’s an interesting version of this in that it’s built on blockchain, probably to some degree, but at the same time, it’s also gonna be probably largely housed within servers. So this is definitely digital currency, but it is not decentralized. beyond the state. I mean, you have to kind of, it’s a funny way to think about it. What people will say is one of the reasons they like cryptocurrency is that it’s decentralized, it’s beyond control, and the way you move beyond control is you base it on blockchain, which nobody can control. Well, it’s just not totally true, but it can be significantly decentralized as opposed to everything being run by a bank, which is a point of hard control. Okay, now in truth, most decentralized systems being built have a significant degree of centralization. Okay, we’re seeing the same thing in China with the digital currency, where we’re gonna see a mix. It will prob, I’m guessing on this, I think it will be decentralized in the sense of it will be beyond the control of private players where banks and others will probably have limited control and lots of people will be able to build upon it. So we will decentralize away from banks and lots of people will be able to build. However, it will not be decentralized away from the state. So we’ll probably see it mostly sitting on servers in a ministry and then everyone’s using it. And that’s kind of an interesting way to think about it. And there’s a lot of interest in this from the government, they’re rolling it out, they’re doing pilots, they’re giving free tokens and free gifts to get people to start using it. There’s a lot of reasons for this. One of them is transparency. You know, everything’s visible. It’s like putting cameras on the street. Once the camera’s on the street, pretty much everything is visible and you can see what’s going on. Well, this is the same thing with money. If you pay with cash, unclear what’s going on. You pay with digital currency, total visibility to the government at least. The other thing that’s going on is internationalization of the renminbi. not being dependent on the Western banking system, which has been weaponized politically, frequently now. It started a couple of years ago. We see the Western countries now using control of technology supply chain. We see it as control of the banking system and they’re deploying all of these against Russia right now. So the prudent thing to do would then be to have an alternative. doesn’t mean you’re not gonna work with that system, but you don’t wanna be dependent. And they’re pretty much doing the same thing with semiconductors as well. Have an alternative ready. Anyway, so there’s a lot going on within that. And out of that, I think we will see Ant Group 2.0 hopefully emerge in the next six months. And I think this is gonna look mostly like a payment platform with credit services offered on top of it. but much more by a traditional bank model. And I think we’re gonna see the wealth management marketplace continue to exist. I don’t think Ulema, the daily life services are gonna be there. I think Ant has already moved them out. So I think we’re gonna be looking at two platform business models that are complimentary. And one of them is gonna look a lot more like a traditional Chinese state bank. That’s my prediction on what’s gonna happen Ant 2.0 domestically. Now let me shift over to the international side where things are much more clear. I mean, a lot of that was me sort of speculating. All right. We look at the Alipay Plus, which is the initiative they’re rolling out. And this is really, you know, before the IPO got halted, Ant had been fairly aggressive for the, I mean, I would have argued it was the most internationally aggressive digital China company. from about 2015 to 2018. It was probably number one. Alibaba was doing stuff, WeChat had tried to go international. We saw, but I mean, Ant was really moving. They were striking partnerships with various digital wallets, country by country, sort of hooking them in. Sometimes they were doing investments. They did a couple of bank investments. They tried to buy MoneyGram. They were pretty aggressive in what they were doing internationally. And it was mostly payment. And you could have seen my prediction, which turned out not to be true, was they would try to do what they had done domestically. They’d start with payment, then they would start to add credit services, then they would start to add marketplace for wealth, you know, the same three to four, same three platforms. Well, that didn’t really happen. But okay, so what is Alley Pay Plus? Now, September 2020, that’s when I think that’s the first time they mentioned it. They had one of their annual events and you know the term Alipay plus was mentioned as a pilot. You know they’ve been sort of floating around but really this didn’t really kick off until late 2021 where it was sort of being rolled out and mostly in Southeast Asia but not totally. And the quote from Ant is, here’s the quote. I think this is, I’m not exactly sure who said it was from the web page. Digital payments are the key to driving the digitalization of business activities. Fine. That’s me saying fine. However, the uneven regional development and technical capabilities of participants have led to a lack of interoperability between existing digital payment solutions, resulting in the fragmentation of payment systems across the world. And that’s a fairly good description of what has been happening. You go to Thailand, you go to Malaysia, you go to Mexico, you see different payment mechanisms, digital mobile payment mechanisms being developed, either digital wallets by startup players, by e-commerce companies, sometimes by social media companies, but also by banks. And so you’ve got sort of countrywide, every country seems to be doing it differently. So what is Alipay doing? Alipay Plus, here’s the quote, Alipay Plus provides global cross-border mobile payment solutions, which enable merchants, including small and medium-sized businesses, to better serve over one billion customers. and basically connecting merchants with multiple different payment methods. So in theory, if I have Gcash out of Philippines, digital wallet, and I fly to Malaysia, and I walk into a merchant on the street to buy a cup of coffee, and they’ll say, oh, you wanna pay? Well, our system here, and I don’t know what the, I forget what the Malaysian, let’s say, fly to Thailand, and they say, oh, we take Dolphin, and we take True Money, and we take Bangkok Bank. Well, I don’t have any of those because I’m flying in from the Philippines. But if any of those are linked in to Alipay Plus, I can then open up my Gcash and basically pay and it’ll do the conversion and the foreign exchange. And basically it links my digital wallet in the Philippines such that I can use it to pay a merchant in Thailand. So it’s the interoperability part of payment solutions cross border. And that’s, that’s pretty cool. And that’s sort of most of what they’re doing right now is cross border payment solutions between merchants and various digital wallets of various kinds. The other thing they’re doing is cross border marketing solutions. Because the other thing, let’s say I go into Thailand and I pay with my G cash because I’m from the Philippines. Okay, that merchant’s never gonna see me again. I’ll fly back to the Philippines, but maybe I come back. Now for coffee, who cares? But let’s say it’s a larger merchant, it’s a Gucci store, a Louis Vuitton, somebody else. Well, this would allow them to do marketing from that merchant to me back in the Philippines. The connection would stay. The connection that enabled payment could also be used for marketing. And marketing oftentimes is a lot of vouchers. They can keep in contact. They probably can know that I’m coming to Thailand and they can start making offers. So it allows sort of marketing to a connection between that merchant before the transaction, after the transaction going forward. And that’s again something that most merchants have no ability to do. And the companies they’re dealing with domestically, TrueMoney, Gcash, those companies have no ability to cross borders into another country, let alone hundreds of countries. Well, but if they plug into Alipay Plus, suddenly they can link in with a couple hundred countries. So I mean, it’s a very clever idea. I mean, this is very good digital strategy. So their plan to offer the merchants and digital wallet providers around the world cross border payment and cross border marketing capabilities. Okay, I mean, this is a services play. That’s pretty cool. So. You walk into a bakery in Macau from South Korea and you pick out your South Korean cacao pay and you pay. And the merchant in Macau gets the local currency and it pulls out of your wallet in the Korean won. And the currency conversion is done in real time and the money is moved and that’s that. You can see the value proposition. Like the value proposition to consumers is great. And they’re not really dealing with consumers. I mean, this is much more this is really b2b They’re dealing with the digital wallet providers not The consumers so you might go to true money and the value proposition to them is You can now We can basically make your digital wallet work globally Anyone who has the true wallet in their smartphone if they fly to another country, it’ll still work So that’s kind of, I mean, that’s a good, in terms of payment. That’s pretty good. I think the value proposition to merchants is much stronger, which is we let you take cross-border payments. So when people from other countries come in and they’ve got their phone, you can tell them, yeah, just use whatever you use at home. You can use it here and we can accept that. and then it links, you know, the Alipay Plus is the back office linkage between these various things. Now, Alibaba Alipay has a lot of strengths in this because you have hundreds of millions of Chinese tourists who are already using Alipay. Now, Alipay Plus is different, but they are linked and, you know, that’s typically 50% of tourists in Asia are from China. Well, everyone from China has Alipay. So if you’re a merchant right away, you can accept payment from all those Chinese consumers coming. So that’s a pretty good part of it. But it’s really sort of B2B. The value proposition for marketing. I think the value proposition for cross border payment is a lot like a utility. It just works. It’s good, it’s smart. The value proposition for cross border marketing to merchants. This is one where I think we could see some real innovation over time. This is one where three to four years from now, this might be really something special. Cause you can say, okay, look, you can now reach potential existing or past customers that have come into your store from other countries. You can now reach them. They’ll tell you if they’re coming in soon, you can make them special offers next time you go, you can send them communications. That’s all good. But you can do things like promotions. You can start to build loyalty programs. You can do daily rewards, flash rewards. You can send e-vouchers. You can start doing brand promotions. So instead of working for the merchants, you might work for a major brand. You can host shopping festivals, other events. I mean, you can see where the cross-border marketing thing in an area like Asia, where you’ve got so many countries with different cultures and languages, doing effective cross-border marketing. That’s a really interesting idea. So that’s basically what this looks like. There are several months into this, they’re rolling it out, they’ve got deals with lots of digital wallets, and now it’ll just be a matter of adoption. And we’ll see how they do. But I think if this company does go public, I think the Alipay Plus is gonna end up being a significant part of the story. It’ll also probably be part of the story that non-Chinese investors can understand. Because when you start getting into the state involvement in the domestic business, that’s a little bit more in the weeds of China and it helps to have a little more expertise there. But generally speaking, Alipay Plus, why is it good strategy? Well, that brings us to the other idea. The other concept for today was bundling. Right, that’s really what they’re doing. You’ve got a payment service, now we add a marketing service, now we start to add more marketing services. we can start to bundle them because it’s all digital. And this brings me to sort of, why is this like Stone, the Brazilian company versus Square, the Jack Dorsey company? Well, Jack Dorsey started with payment solutions for very small vendors. That’s what Square was. If you have a little table and you’re selling apples in a flea market, Well, I guess you don’t sell Apple in a free market, farmer’s market. You know, you can let anyone with a smartphone start to take credit card payments with these little micro merchants. So they started with payments, and then they expanded from there kinda into credit a bit, but they didn’t really get, and they started to put a foot into let’s call merchant services, where maybe you start managing your inventory through this app, instead of just taking your payments through this app. I mean, once you have that foothold with merchants, you can take it in a couple directions. And Stone and Square didn’t go too far into this. They did a couple credit things. They did a couple operating services. They didn’t really go too far. Square in Brazil went much further. They went after the same merchants in the sense of very small merchants in Brazilian cities who usually had physical stores, but very small. and they would go in and put in machines, POS devices, and help them take payment, which they couldn’t do. And that was very useful. And then what was really helpful to them was on top of the payment solution service, they offered working capital services because the way it works in Brazil with credit cards and other things, I mean, there can be 16, 90 days before you get paid, which is brutal. for these small merchants. So what Stone did is it offered working capital services where if you were doing their payment solution, they would arrange to get you your money immediately. And they basically did it as a form of lending. Now that’s what actually got them into trouble because it turns out there was some sort of not bad behavior and people were faking their data and some other things. But. That was really what got them adoption was payment plus working capital solutions. And then the question for them, and I met with Stone a couple months ago, I went out to their headquarters in Sao Paulo and I gave a presentation to their team and talked with the CEO Augusto and they’re very interesting company, but they have a very interesting strategic choice, which is, do we expand into more financial services, which would be like Ant 1.0? Do we go into credit? Do we go into insure tech? Do we go into working capital? Do we offer a full suite of financial services products? Or do we focus more on merchant services? ERP systems, inventory management, marketing, things like that. And they have kind of done both, which you sort of have to do regulatory wise for Brazil. But they ended up merging with Lynx, which is a major ERP company in China. You go into any restaurant, I’m sorry, in Brazil. You go into any restaurant in Brazil, they’re probably running Lynx software. So they merged up with a major, so that was a major move towards, we’re going into merchant services. But whichever way you do it, you’re talking about bundling. We offer you one service, two service, if you buy three services, you get a discount. And that sort of bundling has a pretty good. switching cost. You know, you lock everybody in, you get them running their whole business on your software. So when we look at Alipay Plus, it’s not clear to me which way they’re going to go. I haven’t asked, but I suspect they’re going to go much more into merchant services and they’re going to, digital marketing is probably going to be number one. Because they’re not like stone in that they’re doing suites of services. that are domestic, they’re focusing on the cross-border component. Okay, so that’s an interesting niche to be offering a suite of cross-border merchant or financial services. I don’t really know any other company that’s differentiated that way. So, you know, it’s Ant Financial, it’s Alibaba, I mean they’re endlessly clever. That’s a really clever idea. Cross-border bundles of services for small merchants. Okay. That’s kind of my take on that last bit. Why do I like I why do I like Alipay plus as an idea? We’ll see how it works in execution. But look, I mean, it’s it’s a great target. It’s a problem, but it’s also a problem that’s going to grow in size in terms if you solve this problem, you’re going to ride the wave of cross-border spending in Asia. That’s an unbelievably good secular trend to ride. You’re going to grow. you’re gonna ride the wave of rising middle class wealth of Asia because wealthier people spend more money. So you’ll capture both of them, and you’re gonna ride the large population. You know, as we’re talking about, 50% of the world’s population lives in Asia, if you include India. So that’s just a massive opportunity and secular trend to position yourself against. And if you capture it, you know, that’s a really big tailwind. So smart. I like their positioning against it, cross border. I like that they’re leveraging in a lot of the strengths of Ant and Alibaba. They’re not coming into this with, we’ve got no advantages here. They’re coming into this with some fairly formidable advantages. 50% of Asian tourists are Chinese, so they’ve already got that customer base in their pocket. There are millions of merchants across Asia already using Lazada. Taobao, Tmall. There’s lots and lots of companies across Asia that are using Alibaba Cloud. Now the people at Ant will say, oh, we’re totally independent. Nah, these are sister companies, come on. I mean, but it’s not like they don’t have a massive operational footprint in China and Asia already. So you can lever that in. And then probably the biggest one is, Ant is, top two digital finance company of China. They have unbelievable tech in this area. I mean, how many thousands of employees do they have working on financial services tech over the last 15 years? How many billions of dollars do they spend on this stuff? Who in Asia has the depth of R&D in financial services tech like they do? You know, probably WeChat. you know, and a couple, but not many. I mean, they’re gonna outgun everybody. So they’re rolling across Asia with a fairly impressive team and lots of advantages. So I kind of like all of that. Anyways, that’s kind of how I look at it. And I think hopefully this will tee it up for you. If Ant Financial makes an announcement any given day, Ant Group, that they’re gonna be an IPO, this’ll. This will all be in the news immediately, so hopefully this will put you ahead of the curve on that if this is an interesting company for you. So I’m trying to do this as a bit of a heads up. I have no idea if they’re gonna do that or not, but we’ll see. Okay, and the two concepts for today again, bundling payment platforms. As for me, it’s been a pretty good week, eventful, sort of figuring out my little visa situation. There was kind of an event this week, a 5G summit here in… Bangkok, I went over to that. The Prime Minister was there, so that was kind of interesting. The head of the Ministry of the Digital Economy and Society was there. So I’m kind of getting up to speed on what they’re doing and starting to interact with some of the minister level people, which is fun. I kind of enjoy that. What else? Teaching one more day. Tomorrow’s the last day of my digital transformation class here in Bangkok, so we’ll. take the students, the students get to do basically workshops where they’ve got to take apart a company and come up with a digital plan, like how are you going to transform this company. So we’ll do Nike tomorrow, maybe Mercedes. Yeah, and that’s just a really good exercise actually. You learn a lot when you try and take apart these various companies and figure out what to do. Anyways, that’s it and then I’ll probably bug out of here a couple days later. out to Turkey and Greece and probably on the road for a couple months. So yeah, it’s fun. That’s it’s really, um, it’s so exciting to be able to get back on the road and the whole COVID thing sort of disappears, hopefully into the memories. And yeah, I’ve really had enough. I’m eager. That’s my week. Um, I don’t know if I have any recommendations. Oh, I was good TV show, Superman and Lois. If you like superhero movies, which I do. which is a TV show. It’s really quite good. It’s a bit of a soap opera. It’s a kind of a lot of drama. People crying and yelling at each other and that part I don’t really identify with but it’s generally pretty great show. So anyway, Superman and the Lois. Check it out. That’s it for me. I hope everyone is doing well and I will talk to you next week from I have no idea where. Okay, take it easy. Bye bye.