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The U.S. Is Blocking a Chinese Fintech Giant from Buying MoneyGram

January 3, 2018

American authorities have decided that Alibaba's digital payment firm, Ant Financial, won't be allowed to acquire the cash transfer company Moneygram.

Ant Financial, which was one of our 50 Smartest Companies in 2017, is a Chinese tech company that handles mountains of data generated by its mobile payment business and other banking services. It was created in 2014 by e-commerce giant Alibaba to operate Alipay, a dominant mobile payment platform in China with 520 million users, and uses tools like computer vision and natural-language processing to reimagine financial services (see “Meet the Chinese Finance Giant That’s Secretly an AI Company.”)

In 2017, Ant Financial tried to expand its international footprint, by buying U.S. money transfer company MoneyGram in a $1.2 billion deal. But on Tuesday, the two companies said that the Committee on Foreign Investment in the United States rejected their proposals to merge. According to a report from Reuters, authorities saw the deal as a recipe for national security concerns, because it would give a Chinese company access to sensitive data that could be used to identify U.S. citizens. 

The collapse of the deal represents a blow to Alibaba’s international ambitions. In June 2017, Jack Ma, the executive chairman of Alibaba, gave a talk in Detroit meant to entice American small-business owners to sell their products in China through Alibaba’s shopping sites. And this month, a new data center operated by Alibaba’s cloud computing arm will open in Mumbai, India.

Acquiring MoneyGram would have expanded Ant Financial’s market to around 350,000 locations in more than 200 countries. For now, that’s not going to happen. Instead, the two companies said that they would try to work on other forms of partnerships in remittance and digital payments in China, India, the Philippines, and other Asian markets—as well as America.

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