A $1.5 billion funding round
Masayoshi Son, SoftBank’s CEO, and Alibaba’s (BABA) CEO, Jack Ma, may team up to make an investment in Singaporean ride-hailing startup Grab, as reported by Bloomberg. SoftBank is the owner of US-based (SPY) wireless carrier Sprint (S).
The report stated that the investment would be part of the $1.5 billion fundraising round announced by Grab. Ma’s investment in Grab could come from either Alibaba or Alibaba’s payment affiliate, Ant Financial, which is acquiring US-based money transfer company MoneyGram (MGI).
Didi Chuxing, the largest ride-hailing provider in China (MCHI), could also back Grab’s latest fundraising round. Didi, which is backed by investors such as Tencent and Apple (AAPL), already has a stake in Grab.
Controlling the digital payments market
If Alibaba invests in Grab, the move would be viewed as escalating competition between the company and Tencent, the owner of WeChat. Alibaba and Tencent have competing interests in several technology markets, including the digital payment space.
Digital and mobile payment providers such as Alibaba and Tencent are keen to forge partnerships with ride-hailing and online food-delivery services to expand the market for their payment services. Riders and diners can pay for services via their platforms. These moves by Alibaba and Tencent could also lead to increased competition for digital payment incumbents such as PayPal (PYPL).
Juniper Research estimates that worldwide digital payment transaction volumes rose 20.0% to $3.6 trillion in 2016 compared to $3.0 trillion in 2015.
The battle for Southeast Asia’s economy
As Alibaba and Tencent face slowing growth in their home market, they are pursuing opportunities abroad. Southeast Asia, which includes markets like Singapore and Indonesia, is one of their major international goals.
Not only do many Chinese live in Southeast Asia, but the region also has a huge population—about twice the population of the US—indicating a huge potential market for these services.