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Alibaba affiliate Ant Financial Services closes record US$4.5b round of financing

Funds expected to support expansion in rural areas and international markets

PUBLISHED : Tuesday, 26 April, 2016, 1:07pm
UPDATED : Tuesday, 26 April, 2016, 7:35pm

Alibaba Group affiliate Ant Financial Services, operator of Alipay, plans to accelerate its expansion in mainland China’s rural areas and new markets overseas after completing a US$4.5 billion round of funding on Tuesday.

Ant Financial said its Series B, or second round, of private equity financing was the world’s largest single private placement by an internet company.

China Investment Corp Capital and CCB Trust, a subsidiary of China Construction Bank, each led a consortium that participated in the funding round as new investors.

They were joined by existing Ant Financial shareholders, including China Life, China Development Bank Capital, Primavera Capital Group and China Post Group, the parent of the Postal Savings Bank of China.

“The capital raised in Series B will allow us to invest in the infrastructure, such as cloud computing and risk control, that will underpin our long-term growth in rural and international markets,” Ant Financial president Eric Jing said.

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Founded in October 2014, the company currently provides online payment, insurance and wealth management services to more than 140 million users in the Chinese countryside, where access to financial services remain limited.

Its MYbank and Ant Micro Loan operations have combined to lend capital to more than 20 million small businesses and individual entrepreneurs on the mainland as at March 31.

“China’s rural market is still up for grabs as many consumers there still don’t use e-commerce or digital wallet services,” Gartner analyst Sandy Shen said. “Ant Financial is facing an uphill battle because most of those new to digital financial services are likely to first use what’s available on Weixin, which they have on their smartphones.”

Weixin, marketed as WeChat overseas by Hong Kong-listed Tencent Holdings, is the most widely used social mobile-messaging service in mainland China.

With about 650 million monthly active users, Weixin is being used to pay for online purchases made on JD.com’s online retail platform, send cash to other users in the form of “red envelopes” and get small personal loans.

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“While cash is still king in the rural parts of China, there needs to be a strong alternative to bricks-and-mortar financial services,” said Paul Haswell, a partner at technology-focused international law firm Pinsent Masons. “The Alipay online payment service used in e-commerce marketplaces will certainly help open doors to Ant Financial within China’s rural areas.”

Ant Financial’s latest financing round builds on a year in which the company’s annual active user base surpassed 450 million.

“Ant Financial is a global tech company rooted in China, and that means our solutions for inclusive finance must be relevant globally,” Jing said.

The company early last year teamed up with parent Alibaba, which owns the South China Morning Post, to invest US$575 million in Paytm, India’s largest mobile payment services provider.

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