Xinlian Technology, a third-party payment startup set up by Shandong province’s state-owned highway company SDHS, has recently closed an RMB 280 million (almost USD 40 million) Series A funding round.
The funding round is led by Ant Financial with Genvict Tech and Beijing Wanji Technology as co-investors, according to a statement from the company.
Xinlian Technology is a highway electronic toll collection (ETC) solution provider based in Shandong province. Before the investment, the company’s sole owner was the province’s state-owned highway company.
ETC has become an increasingly important battleground for Chinese tech giants Ant Financial and Tencent. Both Alipay and WeChat Pay are offering easy online signup, free installation of in-vehicle payment units and toll discounts to lure in new ETC users.
Ant Financial’s investment in Xinlian Technology, which it claims is one of the largest in the industry, is an “innovation and breakthrough” in the country’s SOE reform, according to the statement. SOE reform refers to efforts taken by Chinese state-owned companies to improve efficiency, ownership diversification, improve company structure, etc.
It could potentially give Alipay a head start over its rival WeChat Pay because SDHS, the parent company of Xinlian, held more than 1.37 million ETC orders as of July 10 this year.
The Chinese government set out to push for ETC popularisation with an ambitious goal—the Minister of Transport wants 90% of cars running on highways to have ETC devices in them by the end of this year. As of the end of September 2018, China has 70.68 million registered ETC users, about 30% of the country’s car ownership.