Alibaba Financial Affiliate Raises $4.5 Billion
HONG KONG — An online payment affiliate of Alibaba Group, the Chinese e-commerce giant, said on Tuesday that it had raised $4.5 billion from investors in an indication of its larger ambitions.
The affiliate, called Ant Financial, is one of the world’s largest electronic-payments companies by virtue of Alipay, a payment service resembling PayPal that is commonly used in China. Like Alibaba, it is controlled by Jack Ma, one of China’s richest men.
Ant Financial is part of a rising trend in online payments in China, where slow state-run banks and an initial lack of regulation allowed faster-moving private-sector companies to integrate themselves into many facets of Chinese life. Ant Financial has added to Alipay a whole range of Internet financial services, like low-risk money market funds and a wallet app that enables easy payment from smartphones around China.
Ant Financial, which is privately owned, did not disclose details about the size of the stake the investors will hold. It said the investors included a number of state-controlled Chinese companies, including arms of China Construction Bank and China Life, indicating the level of government support Ant Financial enjoys in a country where much of the economy is still state-directed.
Mr. Ma has said he hopes to take Ant Financial public in China. China’s markets have been turbulent in recent months and saddled investors with losses. Alibaba has not disclosed timing, and the fund-raising on Tuesday suggests it could have enough money to take its time selling shares to the public.
In its statement on Tuesday, Ant said it would use the money it had raised to support its global expansion and also would continue its work to connect rural Chinese with its payment, loan and banking services.
Chinese consumers use Alipay to shop online, transfer money to each other, hail taxis, buy movie tickets and even invest their spare change. A money-market fund affiliated with Ant Financial was once one of the world’s largest. According to the release on Tuesday, Alipay has more than 450 million users.
Still, Ant Financial and Alipay face intense competition from Tencent Holdings, a Chinese rival that owns the WeChat mobile-messaging system. Tencent has integrated e-commerce and financial services into recent versions of WeChat, encouraging uses as varied as department stores, municipal water and electricity departments and neighborhood bicycle repair shops and noodle stands.
Ant Financial came into existence as a separate company amid controversy. Alibaba separated the two businesses in 2011, motivated, it said, by regulatory concerns. Yahoo, which then owned more than 40 percent of Alibaba, said it learned of the move only after it was completed.
As a result, investors did not get a share of that business when they bought shares of Alibaba in 2014, when it listed its shares publicly in the United States. At the time, many pointed to Ant as being in charge of some of the more innovative ideas that Alibaba had recently developed.