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28/09/2011 -
A recent partnership between American Express and China-based social networking service operator Tencent will allow both companies to benefit from working in overseas markets.Tencent - China's largest internet company by revenue, hopes the merge will help it separate itself from its competition in the payment processing industry, Alibaba and Baidu. The move will allow the company to "to rapidly expand the scope of our business and accelerate our move into offering cross-border, online payment services," said Luke Lui, general manager of Tenpay, Tencent's payments service.
Specifically, the company is looking for new ways to fuel growth beyond its core business in online games, social networking services and other ecommerce options, and since it is partnering with American Express, users of Tencent's online payment processing service can now purchase these products outside of China.
American Express also noted its desire to expand into emerging markets through acquisitions, and the move represents its first joint venture with a third-party online payments provider in China.
"American Express is considering large international acquisitions that will help the company benefit from demand for mobile payments and online commerce in developing markets such as China," said Amex executive vice president David Messenger, as quoted by Bloomberg.
"The partnership with Tencent will provide a strong boost to American Express’s operations in China," Dave Keung, vice president of Amex's global network division, added in the statement.
Tencent's Tenpay users will now be able to purchase goods on U.S. and U.K. sites that accept credit cards such as American Express. In order to streamline the purchases into a single hub, Amex developed an online shopping service called Globaleshop where the online transactions can be completed.
The Financial News Network points out that the because of the deal American Express has a "potential upside" in the stock market of 20.6 percent, as the average consensus analyst target price has it increasing from $47.87 to $57.72 per share.
Rueters reports that at 470 million internet users, China's online presence is more abundant than the entire population of the United States. And while the deal isn't likely to show immediate dividends, analysts predict the move will close the gap between Tencent and Alibaba's Alipay, it's major competitor in Chinese ecommerce.
