(20 February 2019 – Singapore) Alibaba’s Ant Financial’s US$700 million acquisition of WorldFirst may be a bellwether for SMEs and the Business FX markets as a whole.
Corporate treasuries at multinationals may have the bandwidth to keep abreast of FX markets, but pity the poor small to medium-sized business (SME). Forex is a complicated commodity affected by political, social and both macro and micro economic factors – to stay on top of all the factors that affect FX markets takes a team. For the majority of SMEs, in-house resources to manage FX risk effectively are simply unavailable. “Alipay and WorldFirst’s capabilities and international footprints are highly complementary, and together, we will be able to better serve small businesses and promote financial inclusion around the world. The tie-up will add WorldFirst’s international online payments and virtual account products to Alipay’s broad range of technology solutions, enabling us to reach a greater number of customers, especially in the fast-growing area of cross border e-commerce” said Ant Financial in a statement. World First transferred over £70 billion for customers since 2004 with more than one million transfers made each year.
According to East & Partners Asia Analyst Sangiita Yoong, the data on WorldFirst’s Asia penetration bears this out. “As a newer entrant on the Asian market, WorldFirst is one of the fastest growing spot FX providers to businesses in the region. The payments company currently holds 0.6% of primary Spot FX relationships in Singapore, ahead of RBS. WorldFirst has also achieved strong customer satisfaction ratings for spot FX offerings in Hong Kong and Malaysia at 1.24 and 1.30 respectively (on a 1-5 scale, where 1= satisfied and 5= dissatisfied). “In the UK, WorldFirst records the strongest growth within the SME segment, doubling its customer base from the previous year” Yoong stated.
With banks typically charging a 3-4 percent mark up to clients depending on the ‘tier’ of their relationship, it’s little wonder that SMEs are turning to foreign payment companies. According to Paul Dowling, East & Partners Asia Principal Analyst, this is likely a sign that other deals are set to follow. “Our numbers are saying there’s a significant consolidation coming in the non-bank space. There’s an awful lot of these players around and none of them, perhaps with the exception of three or four, have any meaningful scale. Collectively – whether it’s the UK, Europe, US or Asia – non-bank FX providers are still all sub-10 percent, so the noise about them is somewhat ahead of their actual impact. Commercial customers are using them as number four, number five or number six in their panel of FX providers” Dowling said.