Ant Financial, which operates Alipay, recently issued $3 billion in debt to fund a global shopping spree. In the past few weeks, Ant has taken shares in payments companies in the Philippines, South Korea and the United States.
Ant Financial and its parent company Alibaba Group Holding Ltd (NYSE:BABA) have big plans for global expansion. Ant Financial hopes to have 2 billion users worldwide in 10 years. Currently, 450 million people worldwide use Ant Financial. This rises to 630 million if you count Paytm, the Indian payments service in which Ant owns a stake.
If all goes well, Ant Financial could become a major force in global finance, if it isn’t already.
There are rumors that Ant will go public in Hong Kong and China later this year. Ant is hoping that rapid growth will impress investors and increase its share price. In the past, Ant Financial has been valued at anywhere from $60 billion to $75 billion. A successful IPO could generate a windfall for Alibaba, since BABA is entitled to 37.5% of Ant’s pretax profits.
Ant Financial is expanding in Southeast Asia, a region where 438 million lacked bank accounts in 2016 (according to KPMG). Southeast Asia includes rich countries, like Singapore, where almost everyone holds bank accounts; poor countries like Cambodia and Myanmar, where hardly anyone can access banking services; and countries that are in between, like Thailand.
Alibaba and Ant also see the importance of social engagement for commerce and payments, and Ant Financial inked a deal with South Korea’s largest chat app, KakaoTalk, in February.
Let’s look at Ant Financial’s recent purchases.
Buying Moneygram to Increase Ant Financial’s Global Presence
On Jan. 26, Moneygram International Inc (NASDAQ:MGI) announced that Ant Financial was acquiring Moneygram for $880 million. Ant will pay $13.25 a share in cash, a mere 11.5% premium over MGI’s Jan. 25 closing price.
Moneygram is the world’s second-largest money transfer service, second only to The Western Union Company (NYSE:WU). Moneygram boasts an impressive network, with 2.4 billion bank and mobile accounts and 350,000 agent locations worldwide. At these locations (in over 200 countries and territories), people can send and receive money and pay bills. Moneygram is available at 40,000 locations in the United States, including many CVS Health Corp (NYSE:CVS) stores. I counted 15 CVS stores with Moneygram within a five-mile radius of my location.
Moneygram might be integrated with Alipay so that businesses that now take payments through Moneygram accept payments via Alipay. Growing Alipay’s network increases its value to its users. Moneygram can be used to pay utilities, credit cards, cable bills, auto loans, insurance, mortgages, rent and healthcare bills and to top up mobile phones.
This increases Alipay’s value not only to Chinese tourists traveling abroad, but also to non-Chinese users outside of China. Since Alipay is maturing in China, future growth may be easier to find in other emerging markets.
That’s not all. Ant Financial could bring its technical expertise to Moneygram and speed up Moneygram’s transition to digital. And Moneygram will benefit from access to Ant’s 630 million users.
Ant Financial’s Shopping Spree: Southeast Asia
On Feb. 17, Ant Financial acquired a “substantial minority interest” (later revealed as 45%) in Mynt, a fintech firm much like Alipay. Mynt, also known as Globe Fintech Innovations, is owned by Globe Telecom Inc (OTCMKTS:GTMEF), the largest mobile operator in the Philippines with 66.6 million subscribers. Mynt runs Gcash, a payments service in the Philippines with 3 million registered users. On Gcash, users can top up phones, send money, pay bills and shop.