Alibaba acquires a third of Ant Financial

Chinese e-commerce conglomerate Alibaba Group Holding Ltd. has acquired a 33% stake of Ant Financial, the online financial services behemoth controlled by billionaire Jack Ma, augmenting a global array of investments now worth $83 billion to strengthen ties between the two Internet giants.  Now, Alibaba will continue to consolidate its core e-commerce business with physical retail and location-based services, while helping merchants and brands digitize their operations using its data and cloud technology.

Ant Financial has grown into a $150 billion behemoth spanning micro-lending and insurance to credit-scoring and the country’s largest money-market fund. It’s acquiring assets overseas via deals in India and Thailand, en route to a potential initial public offering.

The deal terminates a current profit-sharing arrangement under which Ant Financial pays royalty and technology service fees in an amount equal to 37.5% of its pre-tax profits to Alibaba. Businesses operated by Ant Financial Services Group include Alipay, Ant Fortune, Yu'e Bao, Zhao Cai Bao, Ant Micro Loan, Sesame Credit and MYbank.

Daniel Zhang, chief executive officer of Alibaba Group, says: “An equity stake in Ant Financial enables Alibaba and our shareholders to participate in the future growth of the financial technology sector, as well as the benefits of user growth and improved customer experience.” The moves was announced as part of Alibaba's Investor Day, during which the company presented fresh data on Ant Financial's soaring growth, with Alipay leading the way.

Zhang has set a goal for Alibaba to have 1 billion annual active users contribute 10 trillion yuan ($1.4 trillion) of transactions by 2023. Ant’s payment business -- China’s most popular transactional tool  will prove instrumental by helping direct traffic to e-commerce and on-demand services such as food delivery. In return, Alibaba gives Ant insights into consumer credit and loan demand.

As of the end of June 2019, Alipay and its local e-wallet partners collectively served 1.2 billion users globally, representing a 20% growth in just six months since the end of December 2018. Since the launch of Alipay’s globaliaation strategy in 2016, the platform and its local e-wallet partners have seen an overall growth of 260% in the span of just three years.