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Alibaba Group Holding Ltd’s (NYSE:BABA) Ant Financial Nets $4.5bn

Alibaba (BABA)

Alibaba Group Holdings Ltd’s  financial arm, Ant Financial Services Group, has raised $4.5 billion in its latest funding round. The cash is expected to finance Alibaba’s expansion spree, though this may not be the case.

Alibaba (BABA)

The new Series B funding round is the largest privately-led fundraising exercise ever reported by an Internet company. This has pushed the value of Ant Financial to $60 billion.

Ant Financial plans to use the mobilized funds to support its vision of expanding financial access to Chinese citizens in far-flung rural areas, while oiling its global expansion wheels.

The company also plans to invest the funds in advancing further its cloud computing infrastructure and develop its biometric verification technology.

The latest funding round saw China Construction Bank subsidiary, CCB Trust, and China Investment Corp Capital, join as strategic investors.

Current Ant Financial investors such as China Post Group-which owns Postal Savings Bank of China, Primavera Capital, China Development Bank Capital, China Life and other Chinese insurers participated in the funding exercise.

Founded in October 2014, Ant Financial was spun off from Alipay. Alipay is a leading payment services provider that facilitates financial transactions in e-commerce platforms. Ant Financial offers a vast range of financial services such as wealth management, payments, insurance and provision of small loans to consumers and small businesses.

Ant Financial belongs to a list of companies known as FinTech, which refers to Internet-based financial services providers that offer a modern alternative to manual-based banking and commerce solutions.

Most FinTech companies seek to exploit the gap that is largely ignored by mainstream financial services companies. This gap is the unbanked segment of the population, most of which is found in Africa, Asia and Latin America.

The World Bank estimates that at least 2 billion people worldwide lack access to any form of banking and financial services. FinTech aspires to leverage on the wide reach of the Internet to address this problem.

Ant Financial currently boasts an active consumer base of about 450 million clients, a figure that exceeds the combined population of the United Kingdom and the United States. The company is already spreading its tentacles outside China into India. It has partnered with India’s biggest mobile wallet firm, Paytm, to provide services to the Indian people.

Ant Financial counts at least 140 million rural Chinese people as its clients. It mostly offers services such as insurance, wealth management services and payments. By the end of March, MYbank, an Ant Financial subsidiary that was opened in June 2015, and Ant Micro Loan had jointly disbursed loans to at least 20 million small businesses and entrepreneurs.

Ant relies on Alibaba to fuel growth

While spun off from Alibaba, Ant Financial has relied on Alibaba’s e-commerce sites such as Taobao and Tmall to fuel its growth. The company exclusively handles all payments made through the e-commerce platforms, a monumental advantage. For instance, in last year’s “Singles Day”, Alibaba processed $14.3 billion worth of customer orders, with all the payments processed via Ant Financial’s Alipay platform.

Ant Financial has always partnered with Alibaba Group to invest in other companies. Only recently, the two businesses spent $1.25 billion to acquire China-based food-delivery company Ele.me. The two also invested US$308.1 million to acquire a controlling share in Hong Kong based lottery firm AGTech Holdings in early March.

Before Alibaba Group launched its historic $25bn initial public offering in New York Stock Exchange in  September 2014, it spun off Ant Financial into a separate outfit.

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