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Alipay strikes deal with banks to expand into Europe; hints at Apple Pay rival

Ant Financial, the Alibaba affiliate which runs the Alipay payments service, announced partnerships with European banks on Tuesday as it continues to expand in the region.

The deals with BNP Paribas, Barclays, UniCredit, and SIX Payment Services will allow an additional 930,000 merchants to start accepting Alipay if they wish to do so, the company claimed.

Ant Financial runs China's biggest payments service, Alipay, which has a total of 450 million active users and processes 170 million transactions per day. The expansion into Europe is aimed at Chinese users traveling abroad. Alipay is deeply ingrained in the lives of Chinese consumers and is used to pay for items in-store and online, for goods and services ranging from taxis to restaurants and clothing.

The partnership with BNP Paribas will allow Alipay payments to be facilitated via the bank's merchant network in France and later in Europe. With Barclays, Alipay will be able to tap the U.K. market. SIX is a payment service provider that will help Alipay expand onto e-commerce platforms and in-store across Europe. And UniCredit will aid Alipay in launching the payment service in Italy next year.

Alipay first expanded into Europe in October 2015 in Germany and has since been working on getting merchants using its platform. The payments service is now available to use in locations such as famous London department store Harrods and Munich airport. Users can also process tax refunds via the app in 23 European countries.

Ant Financial said that at the end of the third quarter of 2016, excluding mainland China, it had a network of close to 100,000 retailers in 70 countries and regions.


Apple Pay rival?

Capturing Chinese travelers abroad is key to locking users into the Alibaba ecosystem, particularly when there are many payment rivals outside of China such as Apple Pay. Chinese tourists spent $215 billion abroad last year, a 53 percent rise from 2014, according to the World Travel & Tourism Council. Alipay is hoping that much of this spending will be through its app.

While Alipay doesn't directly compete with the likes of Apple Pay or Google's Android Pay in Europe, because it's aimed at Chinese users, Douglas Feagin, head of international operations at Ant Financial, hinted that the company could offer the service to international users in the future.


An employee scans a quick response (QR) code displayed on the Ant Financial Services Group's Alipay app, an affiliate of Alibaba Group Holding.
Anthony Kwan | Bloomberg | Getty Images
An employee scans a quick response (QR) code displayed on the Ant Financial Services Group's Alipay app, an affiliate of Alibaba Group Holding.

"In terms of focus on Europe, we like to initially expand Alipay to be much more of a global product with global users. And we're going to do that step by step. Right now we are focused a lot on Asia with a partnership with PayTm in India … we'll look to expand that across Asia, then we'll look to Europe and the United States for future growth," Feagin told CNBC in an interview on Tuesday.

Last year, Alibaba and Ant Financial invested $680 million in PayTm, an Indian payments start-up.


IPO ahead?

Alipay raised $4.5 billion earlier this year to fuel its expansion in a round that valued the company at around $60 billion, people familiar with the matter told CNBC at the time. This makes it the second most valuable private technology company in the world, behind Uber which is worth over $62 billion.

Ant Financial is slated to go public next year. A source close to the situation told CNBC in October that while the firm is "closer to an initial public offering (IPO)", there is no timeline set.

"We don't have any current plans in terms of timeline or venue for the IPO. We certainly see the benefits of being a public company and I think the transparency of being able to communicate more regularly with investors more broadly we see is a benefit, as well as having the currency to do things more strategically could be an advantage to us," Feagin said.