Tencent took its mobile payment rivalry against Alibaba up a notch on Thursday by joining up with private equity fund KKR to invest $175 million in a digital payment platform in the Philippines.
The agreement to take a minority stake in Voyager Innovations, the digital platform of the Philippines’s biggest telecommunications provider, PLDT, is a major coup for Tencent in its efforts to access Southeast Asia's second-largest internet population.
Tencent and KKR said the transaction – the largest investment ever in a Philippine technology company – is expected to close by the end of the year.
For Tencent, the deal creates an opening for its mobile payment service WeChat Pay to enter the Philippines through a strategic partnership with Voyager Innovations. The latter already offers financial services such as mobile payment through its PayMaya app, remittance through Smart Padala, and digital lending through Lendr.
And more significantly it shows Tencent prepared to take on Alibaba in the mobile payment business in yet another overseas market. In this respect, the two Chinese technology giants are already engaged in fierce competition at home as Tencent’s WeChat Pay and Alibaba’s Alipay, which operates under its affiliate company Ant Financial, battle it out for supremacy.
Last year, Alibaba and Ant Financial invested $60 million in Mynt, the digital payment and lending platform of Globe Telecom. Globe Telecom is the Philippines’s second-largest telco and, naturally, PLDT's biggest rival.
According to social networking service Hootsuite, the Philippines had 61 million mobile users as of the end of January. So the market is second only to Indonesia in the Asean region.
“Voyager Innovations connects the growing smartphone population in the Philippines to online payments and financial services. Tencent is glad to support Voyager Innovations and to advance financial inclusion,” James Mitchell, chief strategy officer of Tencent, said.
Bank of America Merrill Lynch is acting as financial advisor to Voyager Innovations.
Tencent and Alibaba have been extending their mobile-payment reach to overseas countries for some time now, through partnerships with local merchants and retailers. However, these partnerships mainly target Chinese tourists by allowing them to pay digitally for goods and services.
Partnerships with overseas telcos, meanwhile, give both Chinese companies exposure to another user base without the need for a payment license.
Tencent currently owns payment licenses in Malaysia and Thailand that allow local users to bind their bank accounts directly to WeChat Pay and pay in local currency.
The Chinese tech giant also acquired Thai mobile payment firm Sanook in 2016, rebranding it Tencent Thailand. And in August, it launched a Malaysian version of WeChat Pay after securing a payment license the previous November.