Mode CCO: Alipay success can be replicated in the UK
Rita Liu, chief commercial officer (CCO) at Mode and Alipay’s former UK CEO, thinks too many fintechs – particularly challenger banks – still rely on interchange fees.
“Neobanks losing money has been a hot topic in the past month,” Liu tells FinTech Futures.
“Challengers have built their offering on top of the card schemes, which means they naturally lean on this [card-centric] process.”
But with the advent of open banking as a way to pay, these card schemes could one day become obsolete.
That’s because account-to-account (A2A) payments initiated by open banking skip the need for a card altogether.
Mode, a fintech set to float on the London Stock Exchange (LSE) this year, is hoping to push adoption for a no-card payments model between merchants and consumers..
“We are building directly on the merchants and consumers,” explains Liu, whose appointment as CCO was announced in August.
“Technology will play a very important role in helping consumers and businesses survive this crisis, look at how barcodes have been used at restaurants,” she says, highlighting the smaller jump consumers now need to make to QR code-based payments.
Putting the “Alipay” in “UK”
Liu spent more than ten years at Alipay, the payments arm of Chinese Big Tech Ant Financial.
She was a founding member of its international business, which she expanded across Asia, Europe, and North America.
“I fought a lot for the success it managed to achieve,” says Liu. In 2019, Alipay landed a deal with Barclaycard, which processes almost half of the UK’s debit and credit card transactions.
It also bought UK payments group WorldFirst in a deal worth roughly $700 million.
The aim of Alipay’s expansion is aimed at boosting merchant acceptance for Chinese tourists outside Asia.
Liu left Alipay in part because of this. Whilst she agrees that the Chinese tourist play is “a huge business opportunity”, she also thinks “Alipay is very big”. With “so many priorities everywhere”, she felt bringing disruptive change to a single market was hard.
Hence her move to Mode, a company essentially looking to achieve Alipay-like success in the UK. It aims to let consumers to pay merchants direct from their bank accounts – just as QR codes allow the Chinese to do.
Whilst Alipay’s parent gears up for a $35 billion IPO in Hong Kong and Shanghai, Mode is gearing up for a $40 million IPO on the LSE next month.
Already a partner of WeChat and Alipay, Mode hopes the IPO will raise its profile. It will also use the proceeds to fund its open banking payments solution, and a rewards scheme for merchants.
Card issuers can invest, but they can’t change
Asked whether card issuers can fight back, Liu’s view is simple. “Card issuers won’t change their commercial structure to A2A payments,” she says.
That’s because without card fees, the likes of Visa and Mastercard simply can’t make enough money to survive. In other words, becoming ‘too’ relevant in an open banking world could kill them.
Asked what she thought of Visa and Mastercard’s respective acquisitions of Plaid and Finicity, Liu says: “If card schemes or incumbents are investing heavily in open banking, then that’s pushing the trend. But being able to move money directly is essentially different to the commercial model of card schemes.”
So, whilst these investments are good for open banking, are the investors themselves just buying time?
Like much of the industry, Liu thinks payments are the “biggest” use case for open banking.
That’s why Mode is consolidating its consumer-facing app into a “banking plus payments” tool in Q4.
“This will lead us to build the path to a connected ecosystem,” says Liu. “And a key piece of that is going to leverage open banking, allowing users to pay directly from a bank account.”
She adds: “Card is dominant, and it’s been like that for decades – but with open banking, there’s an opportunity to disrupt that and cut out the middleman.”
Later down the line, Mode envisions creating a “super app”. This is the model carved out by Southeast Asian players such as Grab and Gojek in recent years.
The idea is that the savings merchants make on card fees can be reinvested into loyalty programmes which help sellers target the right consumers.
“We’re making the current payment and loyalty experience into one connected experience,” explains Liu.
“We have got overwhelming interest from merchant. They have marketing dollars, but the problem is that the return on investment (ROI) is hard to calculate without a platform like ours.”
The consumer play is trickier
With an IPO looming, Mode has got a busy year of business ahead of it.
But one of the key issues Mode still needs to address is the value proposition for the consumer. Whilst the merchant clearly benefits from an open banking payment solution, the benefits for the consumer are less clear.
“We’re still building up the value proposition on this,” says Liu. Mode is currently trying to bring in more in-app integrations which directly benefit users.
“You can use our mobile wallet to invest bitcoin at a 5% APY [annual percentage yield] – that’s a pretty attractive proposition considering the current 0% interest rate climate,” says Liu.
“But it takes time for people to understand what we’re doing,” she adds, again pointing to why the company has chosen now to float.
“For us, an IPO is a unique thing to do. And we’re one of the first to be floating on LSE with a strong crypto asset in our offering.”