The international payments world is facing a huge shake-up.
Alibaba affiliate Ant Financial Services is to buy the US money-transfer company MoneyGram for around $880 million (823 million euros).
Ant, which was formerly known as Alipay, is the world’s largest financial-technology company and it dominates online payments in China.
It is controlled by billionaire Jack Ma, the founder of massive Chinese e-commerce company Alibaba. He owns about a third of Ant which was spun out of Alibaba in 2011.
MoneyGram, along with competitor Western Union, has long dominated the money transfer industry with 350,000 outlets in retail shops, post offices and banks, operating in close to 200 countries and territories.
Putting Ant’s technological expertise together with MoneyGram’s large network of agents and established brand could be a game-changer for the industry.
Experts said it would mean more consumers, including migrant workers sending remittances home, to use online transfer services rather than taking cash to storefronts.
“The combination is a powerful one: leading-edge technology with global reach and a significant physical footprint. Innovation and trust in one bundle,” said Warren Mead, global co-head of fintech at KPMG. “I expect to see the ever increasing convergence of fintech and the more traditional financial services sector.”
CIFIUS approval needed
The deal will have to be approved by the Committee on Foreign Investment in the United States (CIFIUS), a US inter-agency panel that reviews foreign acquisitions of domestic assets for national security concerns. It has previously blocked Chinese deals in the United States.
This comes against a backdrop of rising tensions between China and the US over President Donald Trump’s desire to re-evaluate key foreign policy conventions such as the ‘One China’ principle. He has also threatened to impose punitive tariffs on Chinese imports.
Trump has, however, met with Alibaba’s Jack Ma since his election, and described Ma as “smart” and “open-minded”.