Besides Didi, 19Pay was also in talks with LeEco, but that deal soured after price disagreements
The spending spree of Chinese internet giants on payment companies continues this week. Adding to a lengthening list of mobile payment company acquisitions, local payment news site Paynews is reporting that Didi will fully acquire 19Pay for RMB4.3 billion RMB (US$622 million), citing people familiar with the matter.
The source added that the deal is still under discussion and Didi is expected to fully take over the company in July or August this year. Didi, for their part, has neither confirmed nor denied the discussions to purchase 19pay.
“Mobility covers a rich diversity of payment scenarios. Didi has kept extensive dialogue with partners in this industry,” said a spokesperson. “We continue to focus on our core transportation business and do not have plans to enter the payment business.”
In addition to Didi, the source added that LeEco was also in talks with 19Pay, but the deal went sour because the companies couldn’t agree on the price. This is not surprising given the recent troubles the company has been going through
Founded in 2010, 19Pay is a payment company that provides domestic telecom integration and e-commerce payment services. After gaining third-party payment license in June 2012, Gaoyang Jiexun, the company behind 19Pay, was acquired by GoHigh Data Networks, the listed arm of Datang Telecom in 2013.
As one of the top payment service providers in China, Gaoyang Jiexun’s recharge system offers service to telecom carrier China Unicom in 22 provinces, China Telecom in 5 provinces and China Mobile in 2 provinces. The company has received investment from Sequoia Fund and Zero2IPO Ventures. With businesses in third-party payment, phone bill recharge, gaming recharges, the company’s annual turnover exceeds 30 billion RMB.
Like many other companies that have invested heavily in payment companies, Didi’s motive behind his deal is loud and clear: to have its own payment license.
Given payment license was the primary object of this deal, Didi’s interest of maintaining 19pay’s current business was minimum. But the source disclosed that the startup would not face large-scale layoffs in the future. The current staff would be transferred to the parent company GoHigh Data Networks.
Currently, Didi supports two mainstream third-party payment services: WeChat Payment, the mobile payment tool backed by Didi investor Tencent, and Alipay, Alibaba’s digital payment service that was integrated after the Didi-Kuaidi merger.
With the acquisition of a payment license, Didi may add a payment option of its own, but the company probably won’t stop there.
The license is a further indicator for the company’s plans in expanding into the financial sector, which has become a must-have business of nearly every major Chinese internet company thanks to the proven model and promises of higher margin.
The deal is significant as it demonstrates Chinese internet company’s rising craze toward online payment. However, it also underlines the disappearance of independent payment providers in the country. Sun Jiangtao, founder of Qiandaibao, a mobile payment company recently acquired by Meituan-Dianping, said after the acquisition that “there’s no space for pure play companies in China.” He added that companies with access to customers will process payment themselves, and there won’t be a need for any independent processors.
The article Didi rumored to gain payment license through acquisition of 19Pay first appeared on Technode.
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