There’s a war for payment gateways going on and it’s taking place on two fronts. What is different about this war from all others in the corporate arena is that which front wins out as the battlefield of choice may be more important than who becomes the ultimate victor.
Tuesday, China’s Ant Financial, an Alibaba (NYSE:BABA) subsidiary, reluctantly withdrew a $1.2 billion bid for Dallas, TX-based Moneygram International (NASDAQ:MGI). Apparently, the Committee on Foreign Investment in the United States (CFIUS), an arm of the US Treasury Department, wasn’t comfortable enough in the end with who Ant Financial was to let the deal go ahead.
What is particularly interesting here is how the intended MoneyGram purchase – which was offered at a 30% premium to the current price – synchs up with Alibaba’s seeming intentions to dominate the global payment gateway market. Cryptocurrency investors know well that Alibaba was the driving force behind Onchain, which is the creator of Antshares, later renamed NEO. NEO is the 11th largest Crypto in the world with a $6.2-billion market cap and around $400 million of daily liquidity:
Lately, probably as a direct result of the planned Moneygram acquisition, NEO developers have kept mum on the topic of disrupting Moneygram money payments. Back when it was shedding its former AntShares skin however, disrupting cross-border payments was indeed one of the Chinese-made blockchain’s core selling-points:
Since one of the biggest challenges to date is how to use cryptocurrencies in the real world, [NEO] says the answer will be its Visa card. They are pitching their debit card as an instant converter between multiple digital currencies and fiat money, i.e. the dollar, yen and euros.
They’ve received over 10,000 orders for their cards already and will be taking a 2% cut from each transaction. Although for some of the cryptoheads this may seem like a huge cost, don’t forget that giants like Paypal and Western union take anywhere between 5-15%.
Alibaba’s Quest For Global Payment Gateway Dominance
Because of the rebrand of NEO, it’s not as obvious at first glance, but essentially, Alibaba wants to have its cake and eat it here. That is presumably what got the CFIUS nervous enough to tell a New York Stock Exchange-listed company that it’s shareholders won’t be getting a the premium they were offered on their stock recently in return for selling.
What Alibaba wants is nothing short of total domination of the payment gateway markets. And who wouldn’t? You are essentially talking about a multi-trillion dollar market, the scale of which is comparable only to the interbank payment market that Ripple is attempting to infiltrate.
Because the CFIUS has now come down with an affirmative “no” on the Moneygram deal, the US government has essentially pushed Alibaba into a position of having to ramp up their investment in Onchain and related crypto solutions. For if you cannot buy your way in, then your only choice is to build on the disruption that you are already in the throes of causing.
What might be irritating news to shareholders of Moneygram then could be great news for holders of crypto NEO, as a nice tidy sum of the $1.2 billion Alibaba was willing to spend to capture the Moneygram customers will likely be spent instead on reinforcing the position of Onchain in the battle for global payments.
There may still be some light at the end of the tunnel for Monetgram shareholders however. If one of the other US-based co-founders of AntShares, let’s say someone like, Microsoft (NASDAQ:MSFT) for example, was to make a bid for the company it would likely pass through the appropriate authorities. But that would fundamentally change the way in which Mr. Softie was valued by securities analysts. Still, if the potential market between synching crypto solutions with old-school telegraphic money transfers is large enough, someone will raise the possibility somewhere.
Where Will The Battle Be Held?
What this all comes down to is a battle between markets. On the one hand you have public-listed companies in the form of securitised ownership with established legacy repeat customer business and revenue everyone wants, but it’s tied up in sovereign red tape. At the other end you’ve got cryptocurrency solutions under development and deployment which, while swelling with increasing amounts of cash daily as the largest cryptoboom in history gets underway, the manufacturers of these new solutions are stuck trying to educate half the world on how their core value proposition, the Blockchain, actually works.
Where that battle ends up being fought – which is to say, on a regulated stock exchange or on an anonymously-enabled distributed ledger platform – is probably more significant a question than who wins it at this point, since it will dictate the course of how capital is raised, projects are financed and money is harnessed globally in the years ahead. Right now the answer seems to be that round 1 goes to the distributed ledger technology.
Note: This story has been updated from the original version. It mistakenly attributed Western Union, not Moneygram, to the target company.