But Chanticleer has not seen anything as comprehensive in its analysis of the two companies and their potential impact on the world economy as the document released this week by the Better Than Cash Alliance.

The alliance is a global partnership of about 50 entities including the Bill & Melinda Gates Foundation, Citi, MasterCard, Visa, Omidyar Network, US Aid and the United Nations Capital Development Fund.

The mission statement of this loose alliance of governments, companies and not-for-profit institutions is to "accelerate the transition from cash to digital payments in order to reduce poverty and drive inclusive growth".

Rapid development

The alliance believes the rapid development of digital payment ecosystems in China carried lessons for all countries. The report uncovers evidence that digital payment platforms have been a powerful force in providing people from lower socio-economic groups with the access to micro-finance sufficient to start new businesses.

Also, digital payment systems have opened the way for hundreds of millions of people in China to access innovative savings products.

The key message for the developed world is that digital payment ecosystems are capable of causing enormous disruption to established financial institutions. China is home to the largest peer to peer lending in the world thanks to the connectivity created by Alibaba and Tencent.

All this has occurred within a regulatory environment that has been based on the principle that says "you can do what you like until it goes wrong".


The most telling statistic showing the success of that light-handed regulatory approach in China is the latest data on venture capital invested in fintech.

Recent data prepared by Citi found that China accounted for more than 50 per cent of total fintech investments globally in the first nine months of 2016 and was the only major region where fintech investments increased in 2016.

Fintech investments doubled in the first nine months of 2016 versus the same period in 2015.

China is at the forefront of business-to-consumer fintech adoption for several reasons including the rise of Alibaba and Tencent, which are referred to as Chinese dragons.

"The rise of the Chinese dragons reflects a unique combination over the past decade of incredibly rapid digitisation and the simultaneous rise of the Chinese mass middle class, along with poorly prepared incumbents facing off against entrepreneurial newcomers," Citi analyst Ronit Ghose said.

Social media growth

"The growth of the biggest Chinese fintech franchises is connected to e-commerce and social media growth in recent years and we consider the Chinese internet giants, Alibaba and Tencent, a good indirect proxy on the growth of Chinese fintech.

Brokers and fundies like the two Chinese internet giants because of their sound growth prospects.


Alibaba, which is listed on the New York Stock Exchange, has a market capitalisation of $US278 billion, a forward price earnings (PE) multiple of 32, earnings growth last year of 39 per cent and a forecast return on equity (ROE) for 2017 of 16 per cent, according to Nomura Research.

Tencent, which is 33 per cent owned by South African company Naspers, has a market capitalisation of $US277 billion, a forward PE of 29, earnings growth last year of 39 per cent and forecast ROE in 2017 of 28 per cent, according to Nomura.

Both stocks are on the buy lists of most brokers. Alibaba is up 23 per cent this year while Tencent has popped by 44 per cent since January.

Hardly a day goes by without another story about Amazon threatening Australia's retailing industry.

But it is small beer compared to its Chinese competitors.

For example, the total global merchandise volume pumped through Alibaba's e-commerce sites in 2015 was $US448 billion, according to Citi.

Extraordinary success

That is about double the amount of global merchandise value churned through the combined internet sites of eBay ($US22 billion) and Amazon ($US214 billion) in 2015.


The digital ecosystems created by Alibaba and Tencent have had extraordinary success because they have overcome the biggest barrier to internet commerce – trust.

If the social network that you access at least 10 times a day also offers you a payment option for all purchases then there is no barrier to creating companies which touch every aspect of your life.

That is what is happening in China.

A typical user of Alibaba's Alipay wallet can pay mobile phone bills, transfer money, order China's version of an Uber ride, access the Yu'eBao wealth management service, purchase movie tickets, pay utility bills, managing contacts, play the lottery and make donations to charities.

Someone with a WeChat wallet can transfer money, pay bills, utilise coins used in internet gaming, pay credit cards, purchase train and airplane tickets, order China's version of Uber, access a Red Envelope service for sending cash gifts to relatives, book hotels and access group buying services.

At the core of Alibaba's digital payment ecosystems is the online payment service called Alipay, also known as the PayPal of China.

Citi says in its latest research that Alipay is much bigger than its American peer with a total payment value estimated at $US900 billion, or three and half times the size of PayPal.

"Alipay has an almost 50 per cent market share in third-party online payment and an over 80 per cent market share in third-party mobile payments in China," Citi said.

The financial arm of Alibaba is called Ant Financial. It now offers a full range of products including savings, lending, and online banking. Alibaba's credit scoring system called Sesame Credit is transforming lending and borrowing by making loans available to people with little if any collateral.

Tony Boyd