Ant Financial, Alibaba’s payment affiliate, will make a huge investment of $200 million in a unit of the South Korean messaging giant Kakao. This marks the Chinese firm’s latest step to expand its global reach. In afternoon trading in Seoul on Tuesday, Kakao shares soared following the news about the Alibaba unit’s investment.
Alibaba expands its global presence
Not even a month has passed since Ant bought U.S.-based payments operator MoneyGram for about $880 million. It also struck a partnership deal with Thailand’s Ascend Money in November. Alipay accounts for 80% of electronic payments in China.
Alipay is used for e-commerce at Alibaba’s online venues and in a large number of mobile applications. It is also involved in investment services and online banking.
In a joint statement with Kakao, Douglas Feagin, president of Ant Financial International, said, “South Korea is an important market for Ant Financial in its global expansion, and we see many opportunities in the market for innovative services and growth in mobile payments.”
The Alibaba unit made this investment as part of a larger strategic partnership to connect Ant’s 450 million users worldwide with Kakao Pay, which currently has more than 14 million subscribers.
Kakao’s mobile messaging service Kakao Talk is its most popular service with more than 48 million users globally. Earlier this year, the Korean firm decided to spin off its mobile payment service Kakao Pay into a separate entity offering services such as bill payment and remittance.
A win-win deal for both
Ant Financial is already well entrenched and experienced in China in areas like bill payment, peer-to-peer transactions, web banking, over-the-counter payments and more. Therefore, the alliance makes strategic sense for both parties. Alibaba will not just help Kakao accelerate, but it also will gain substantially.
Alibaba will get an opportunity to push its e-commerce services more aggressively in Korea via this alliance. It will also make it easier for Chinese visitors to use Alipay in Korea, notes TechCrunch.
Meanwhile, Ant Financial is closing in on a $2 billion debt funding round which it will use to make investments and acquisitions. Plenty have already taken place. In addition to buying U.S.-based MoneyGram for $880 million and investing in Ascend Money (Thailand), it has also invested in Mynt (the Philippines). Alibaba holds equity in PayTm (India) and M-Daq (Singapore) as well.
Alibaba shares are currently worth over $100. Year to date, the stock is up more than 14%, while in the last year, they are up more than 49%.