M&A deal of the month: Ant Financial Acquires World First

M&A deal of the month: Ant Financial Acquires World First

Volker Schloenvoigt
March 4, 2019

Today, most business papers frequently report on the so-called trade war between China and the US. There is also a lot of discussion about increasing concerns in the Western world – rightly or wrongly – linked to security when deploying Chinese telecommunications / mobile or chip technology. Within the payments industry, such discussions have not taken place. The expansion of Chinese schemes (UnionPay) and growing reach of payment technologies (WeChat Pay and AliPay) is well documented and hardly a month goes by without another press release about partnerships or WeChat Pay / AliPay integrations. That all makes sense as it is clear now that from a merchant acquiring perspective the expected increase in Chinese tourists makes WeChat Pay or Alipay acceptance almost a must-have for retailers in certain merchant categories or locations (e.g. airports). However, these are partnerships and except the failed acquisition of MoneyGram by Ant Financial, there had not been much activity on the M&A side.

Last month, however, saw the biggest Chinese investment in a Western payment company to date. Ant Financial acquired UK-based currency exchange and payment company World First for approx. $700m. The deal was concluded after World First closed its US operations. World First is a global provider of currency exchange and remittance products. According to their own data, it has served more than 700,000 customers and transferred a total of £70bn over the last 15 years. One of its products is aimed at marketplace sellers, i.e. individuals or small businesses that sell through platforms like Amazon. It collects payments from international buyers and by applying competitive exchange rates transfers money back into the country where the seller resides. With the recent launch of Amazon Currency Converter, a service that allows sellers “to receive the proceeds of their earnings into their local bank account if that account is located in a different country or region from the marketplace on which they are selling”, there was real competitive pressure on World First which, allegedly, resulted in declining growth rates and meant that Ant Financial’s move came just about at the right time.

Ant Financial is 33% owned by Alibaba and runs AliPay, the B2C mobile payment platform that is being used by approx. 1bn users. The growing cloud of market place platforms and the ability to serve businesses that sell via this channel (i.e. B2B or B2B2C) appears to be one of the motives for Ant Financial to make this acquisition. An integration with Alibaba should be expected very soon. In addition to that, it provides Ant Financial with a really strong international footprint and probably helps overcome the disappointment of the failed MoneyGram deal two years ago. It was an opportunity that presented itself and it will be interesting to see how the competition with Amazon evolves. But more importantly, is this the start for further Chinese investment in Western payment businesses?

The content of this article does not reflect the official opinion of Edgar, Dunn & Company. The information and views expressed in this publication belong solely to the author(s).

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