Ant Financial, an Alibaba affiliate formerly known as Alipay and operator of the Alipay payment platform, announced that it will be purchasing American money transfer company, MoneyGram, for $880 million USD. Ant financial will be paying $13.25 per share.
The move reflects Ant Financial’s push for global expansion. In September of 2015, both Ant Financial and Alibaba invested in Indian One97 communications, the parent company of Indian etailer, Paytm, making their joint share 40% of the company. Additionally, in June of 2016, Ant Financial purchased 20% of Thailand’s remittance company, Ascend Money. These deals will allow use of Ant Financial’s Alipay to spread beyond China, where it currently has 450 million users.
AliPay Grows
The purchase of MoneyGram, in particular, will greatly expand coverage for Alipay, allowing them to mark their presence into the United States. With over 347,000 physical locations in 200 different countries, MoneyGram currently boasts the largest money transfer market share after remittance giant Western Union. In 2015, Moneygram reported $1.4 billion USD in revenue, with only 13% of that revenue coming from digital platforms similar to Ant Financial’s Alipay platform. The purchase of MoneyGram will give Alipay greater access to this large group of remittance customers, including those customers that come from MoneyGram’s affiliation with Wal-mart. The purchase will also give access to these customers without the headache of regulations that often come with the remittance market. Ant Financial confirmed this aspect of the acquisition, commenting in a statement that the acquisition “will provide greater access, security and simplicity for people around the world to remit funds, especially in major economies such as the U.S., China, India, Mexico and the Philippines.”
Despite MoneyGram’s success, it is still recovering from the financial crisis of 2008, when $860 million in bad investments, including assets backed by subprime mortgages, threatened ruin of the company. Goldman Sachs and private equity firm Thomas H. Lee Partners saved MoneyGram by purchasing preferred stock, and Goldman also provided $500 million in debt financing to the company. MoneyGram is still in the process of managing these debts.
Ant Financial’s move to purchase MoneyGram is a surprise to many, given the current uncertainty surrounding global politics. As both the United Kingdom and the United States push to further regulate their borders, the remittance market may be one of the first to feel the effects of a “deglobalisation” push. However, that clearly isn’t keeping investors from seeing the value of the remittance market.
More about MoneyGram
MoneyGram International Inc. is headquartered in Dallas, Texas, with operation centers in St. Louis Park, Minnesota. It is one of the largest money transfer services companies in the world, offering a variety of foreign exchange and domestic fund transfer services to consumer and business clients.
MoneyGram was originally the result of the merger between Denver-based Integrated Payment Systems and Minneapolis-based Travelers Express. Before the merger with Travelers Express, MoneyGram was a subsidiary of Integrated Payment Systems. Acquired by Travelers Express in 1998, the combined companies were eventually renamed to MoneyGram International in 2004.
By 2006, MoneyGram International had successfully expanded to regions in Eastern Europe, Central America, and Asia Pacific. The company employs more than 96,000 agents and has introduced new services, including its bill payment service and online money transfers.
MoneyGram offers its services to both individual consumers and to businesses through its network of agents and financial institutions located throughout the world. The company is divided into two categories: Global Funds Transfers and Financial Paper Products.
MoneyGram Products for Individuals
Individuals who need to send money, either domestically or internationally, can use MoneyGram’s online system or mobile platform to transfer funds for purchasing property, sending remittances to family members, making payments, or for any other number of reasons.
MoneyGram customers have a number of options for sending money and can use a debit or credit card, or a US-based bank account. For fast deliveries, same day transfers will deliver funds for cash pick-up typically within 10 minutes after the transfer is entered in MoneyGram’s system. Customers who don’t need the money immediately can choose to do an account deposit money transfer, which takes longer but is a more economical choice. With this option, funds can be sent to the recipient’s location in over 200 countries and territories to be deposited into their account, typically arriving within three business days.
MoneyGram also offers two additional ways for individuals to manage their money and payments conveniently and securely. The Prepaid Visa Debit Card allows customers to make purchases anywhere the Visa debit card is accepted, and to pay bills using the available, pre-paid card balance. Money orders are also available and can provide the benefits and convenience of checks without having to open a checking account.
Customers who need to make mobile phone, healthcare, or government payments, or pay bills for their mortgage, auto payment, credit card, rent, phone, utilities, cable, insurance, and many other bill types, can use MoneyGram’s bill payment service to make quick, easy, and secure payments. MoneyGram offers same-day, next-day, and 2-3 day payment services, and gives customers the choice of paying online or in-person at one of 38,000 locations.
