China’s Tencent Acquires Minority Stake in Payment Startup Afterpay

The deal could help ease selling pressure that Afterpay has experienced since Visa unveiled plans to enter its core market.

Tencent Holdings Ltd. has acquired a five percent stake in Australia’s Afterpay Touch Group Ltd, an early adopter of buy-now-pay-later consumer lending. Based on Afterpay shares’ closing level on Friday, Tencent’s shareholding is worth $390 million in a deal that bolsters the Chinese internet giant’s growing presence in the payment industry.

Afterpay, which has 7,400 active merchants in the U.S., 35,500 active merchants in Australia, and New Zealand, let shoppers purchase products without paying upfront or having to apply for a credit card or loan.

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In the UK, Afterpay has onboarded over 400 active merchants, and according to its latest filings, it counts three of the U.K.’s largest eCommerce retailers (ASOS, Boohoo, and Marks & Spencer) as customers.

Afterpay has posted a $15.4 million loss in the first half of 2019 due to high investment spend to pursue growth in the United States and Britain.

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With the Chinese social media and gaming giant now officially on board, other potential investors may look at Afterpay. That could help ease the selling pressure that its stock has experienced since credit card giant Visa Inc unveiled plans to enter the market.

The entry of such a payment giant like Visa was making some investors think twice about Afterpay.

Afterpay CEO and Managing Director Anthony Eisen said in an announcement, “Our global expansion is accelerating, with the U.S. and U.K. growing at a considerably faster rate than what we experienced in ANZ. The U.S. now represents over 30 percent of the group’s total underlying sales and has the largest number of customers actively using the platform.”

China’s largest social media and gaming company is already a major shareholder in some of the payment startups, including online-only bank WeBank, and online-only insurer ZhongAn Online P&C Insurance Co Ltd (6060.HK). It has also invested in other fintech startups in markets from the Philippines to Germany.

Most recently, Tencent has paid $180 million for an undisclosed minority stake in Brazilian financial technology company Nu Pagamentos SA. The move marks Tencent’s debut in Latin America’s largest economy.

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