China’s largest ride hailing firm Didi Chuxing, which ranks as the second most valuable company on China Money Network’s China Unicorn Ranking, has agreed to fully acquire third-party payment firm 19Pay for RMB300 million (US$45 million), in a move to develop its own payment services, putting itself in direct competition to Chinese tech giants BAT.
Didi made the investment in 19Pay, an indirectly owned subsidiary of Shanghai Stock Exchange-listed GoHigh Data Networks Technology Co., Ltd., via its wholly owned subsidiary, Beijing Shiyuan Technology. The deal has obtained approval from the People’s Bank of China, according to a company filing.
19Pay was established in 2010 and obtained a third-party payment license in 2012. Once the deal is completed, Didi will be allowed to have its own payment services, in addition to the ride hailing app’s current payment options including Tencent’s WeChat Pay and QQ Wallet, Alibaba’s Alipay, Apple Pay, credit cards and CMB OneNet Service.
Chinese authorities have been tightening third-party payment regulations during the past two years. Last year, the PBoC said it would stop approving the establishment of new payment institutions and control the number of third-party payment licenses issued. As of this June, there are only a total of 247 valid payment licenses in the country, according to the PBoC.
Such move led to significantly inflated prices of such licenses as companies are forced to buy firms that already own payment licenses. Last September, Chinese on-demand local services provider Meituan Dianping acquired third-party payment firm Qiandai.com, after its own e-wallet business was banned by PBoC in April.
Didi had no choice but to buy a company with an existing payment license, as the ride hauling giant has been aggressively expanding into financial services. Last January, Didi launched an e-commerce platform for vehicle purchases, allowing users to buy cars via its mobile app. Two months later, it set up a new wholly-owned subsidiary to start its vehicle leasing business.
Didi also formed strategic partnerships with a number of financial institutions including Dianrong, China Merchants Bank to offer users an expanded array of financial services last year. In addition, China Life Insurance made a US$600 million strategic investment in Didi last June. The duo said at that time they would jointly build a comprehensive partnership on Internet-powered financial innovations.