Alibaba Group Holding Limited’s (BABA - Free Report) affiliate Ant Financial is leaving no stone unturned to strengthen its capabilities beyond financial services.
This is evident from the company’s recent plans to bring third-party vendors on its mobile payment platform called Alipay. It intends to offer retail, food and healthcare-related services with the help of these vendors on Alipay.
Ant Financial strives for further value-creation with respect to its users. To this end, it is aggressively looking to provide food delivery and hotel bookings services via Alipay.
We believe, the latest move is likely to aid its competitive edge against other players in China like Tencent and Meituan-Dianping.
Moreover, the latest strategic move bodes well for the company under the current global health crisis induced by the novel coronavirus, which is placing people under house arrest. However, due to the COVID-19 scare, the adoption of apps and Internet-based services is increasing rapidly.
Alibaba successfully encouraged developers to create mini-programs for the third-party vendors, devising 181 of those on Alipay despite the coronavirus impact. Also, delivery services were introduced recently on Alipay by one of the vendors during this period.
Additionally, the company’s Alipay-based value-addition efforts are expected to attract users as well as enrich the experience of the existing users, which in turn, will bolster its user base.
Notably, customer-centric approaches of the company are expected to boost investors’ confidence in the near term.
Coming to the stock price performance, Alibaba has returned 10.2% over a year, outperforming the industry’s rise of 5.5%.
Growth Graph: How Others Are Placed in China?
We note that the digital payment as well as the e-services markets are booming in China on the back of a growing smartphone and Internet-user penetration.
Per a Statista report, revenues in the e-services market of China are pegged at $61.6 billion for 2020. Further, the figure is expected to touch $81.6 billion by 2024, witnessing a CAGR of 7.3% between 2020 and 2024.
Moreover, digital payments market per the same report is expected to generate a total transaction value worth $1.9 trillion in 2020 and the figure is expected to see a CAGR of 17.1% between 2020 and 2024 and also reach $3.1 trillion by 2024.
We believe, Alibaba is well-poised to capitalize on these immense growth opportunities on the back of its recent plans related to Alipay.
Meanwhile, Tencent and Meituan-Dianping are also pulling out all the stops to reap benefits from these potential markets.
Notably, Tencent’s WeChat Pay allows users to make bill payments, buy groceries and book taxis among other services. All these are aiding the company’s user momentum.
Additionally, Meituan-Dianping offers services like on-demand food delivery, movie ticketing plus hotel and travel booking to name a few via its platform.
Nevertheless, Alibaba has ramped-up its initiative to integrate third-party apps and services into Alipay. The company intends to enable third-party vendors to open "mini-programs" on Alipay. This remains a major positive.
Rising Competition in Global Digital Payments
Growing initiatives of Alibaba to strengthen services offered by Alipay are likely to intensify competition in the booming worldwide digital payment space against the players like Square (SQ - Free Report) , PayPal (PYPL - Free Report) , Alphabet and Amazon (AMZN - Free Report) .
Moreover, Ant Financial’s increasing global investments are tailwinds. Investments in Thailand, Southeast Asia and Europe augur well for the company’s global expansion initiatives.
Additionally, the company’s application for Singapore digital banking license remains noteworthy.
Currently, Alibaba carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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