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Alibaba’s Ant Financial Invests In bKash, Alibaba’s Ambition, And bKash’s Upside

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Apr 27, 2018

Ant Financial Services Group, an Alibaba Group affiliate, will take a 20 percent stake in bKash as part of a strategic investment at an undisclosed valuation. The companies announced the deal during an agreement signing event took place at Radisson Hotel in Dhaka on Thursday. The companies did not disclose details of the deal.

Ant Financial runs Alipay, China’s largest online payment service, while bKash is the largest MFS in Bangladesh and the company just launched its mobile app on Wednesday in Dhaka.

Future Startup previously reported that Alibaba holding talks for a potential investment in bKash.

Apart from investing in bKash, Ant Financial will help bKash in increasing its technological capabilities, allowing it to provide greater convenience and security in mobile financial services throughout Bangladesh.

Brac Bank, which owns a 51% stake at bKash, said in a price sensitive information disclosure that its board of directors approved the share purchase proposal of bKash in a meeting on Thursday. Alipay Singapore E-commerce Private Limited will purchase 20 percent of the equity of bKash, including preference share which will be calculated based on post-dilution. The stake will be sold to Alipay from the holdings of Money in Motion LLC, International Finance Corporation, and Bill & Melinda Gates Foundation. Brac Bank will retain its 51% stake in the company.

Alipay will purchase 10 percent of the bKash share from Money in Motion, IFC and Bill and Melinda Gates Foundation. The deal entitles Alipay to subscribe for a further 10 percent share of bKash. Money in Motion and IFC have 36.5 percent 12.5 percent stake in bKash, respectively. The deal is expected to complete within 15 to 18 months.

Ant Financial Invests In bKash - FS
Ant Financial Invests In bKash | bKash CEO Kamal Quadir and Ant Financial senior vice-president Douglas Feagin exchange documents after signing an agreement on behalf of their companies for strategic partnership at Radisson Hotel in Dhaka on Thursday | Photo Credit - New Age

bKash and digital payment market in Dhaka

From Alibaba Has Been Holding Talks To Invest In bKash:

bKash is the leader in MFS market it in Dhaka with about 75% market share, according to last year data. It is the second largest mobile money service in the world. Launched in 2011, as a joint venture between BRAC Bank Limited, Bangladesh and Money in Motion LLC, USA, the company previously raised investments from International Finance Corporation (IFC) in 2013, a member of the World Bank Group and Bill & Melinda Gates Foundation in 2014.

bKash has experienced a tremendous growth over the past few years and has become synonymous to P2P money transfer in the country. Over the past few months, it has been aggressively pushing into payment area. It has also requested official permission to provide loan and insurance services.

That said, competition is slowly growing in Dhaka’s payment space. There are some 17 providers of mobile financial services (MFS) in Bangladesh. However, the two largest, bKash and Rocket, have a combined market share of over 90%.

There are new players entering the market as well. Among them, iPay, co-founded by Zakaria Swapan of Priyo.com is the most prominent one. The startup which is now beta testing its service seems to have developed a superior technology and a long-term ambition. India’s Paytm also takes interest in Bangladesh market.

Although Dhaka’s digital ecosystem is still at its early stage, it is growing fast. It is a big market. Mobile phone penetration has gone through the roof over the past few years. Given the reality, digital payment has immense potential in the coming years and Alibaba, if the deal goes through, joining bKash will affect the market in more than one way.

Ant Financial’s Ambition and bKash’s advantage

Again from Alibaba Has Been Holding Talks To Invest In bKash

For Alibaba, investing in bKash comes naturally given that it has invested heavily both in ecommerce and payment in this part of the world.

Alibaba and its Ant Financial have a significant investment in India’s Paytm and its parent company One97 Communications and a host of eCommerce ventures in India.

It has been seeking growth potentials in other markets in Asia for a while now.

Suggesting the ambition of Ant Financial, The Information wrote early this year: “China’s most valuable online finance company is on an acquisition spree to build a global powerhouse stretching from India to Texas. To fund its overseas deals, Ant Financial Services Group—an affiliate of online shopping giant Alibaba Group—is in early discussions with bankers to raise more than $3 billion, possibly by issuing bonds or bank loans, according to a person familiar with the talks.”

For bKash, things can’t get any better and timing as well can’t get any better. This deal will give bKash a meaning upside in the coming days given that Alibaba has experience in payment in China as well as in many other markets in Asia. In fact, after investing in Paytm, its Ant Financial arm helped the company with technology and pertinent insight. This investment will give bKash a lot of strategic advantage in the coming fintech competition in Dhaka.

This reality is evident in bKash’s CEO’s statement after the deal:

“Along with its investment, Alipay brings the best payment technologies built by thousands of engineers and the knowledge of applying those technologies to economies like China which went through a massive transformation in recent years. Such track record makes Ant Financial a fitting partner for bKash since Bangladesh too has a large population of 160 million and an economy that is advancing rapidly. This investment opens many new opportunities for bKash and demonstrates the confidence a world-class player is placing in Bangladesh,” said Kamal Quadir, Chief Executive Officer of bKash.

(This is a developing story)

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Ruhul Kader is a technology and business analyst based in Dhaka, Bangladesh. He is also the co-founder and CEO of Future Startup and author of Rethinking Failure: A short guide to living an entrepreneurial life. He writes about internet business, strategy, technology, technology policy, and society. He can be reached at ruhul@futurestartup.com

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