PAY Paymentus Holdings Inc

HONG KONG—China's internet-finance heavyweight, Ant Financial Services Group, is expanding overseas.

The financial affiliate of Chinese online-shopping giant Alibaba Group Holding Ltd. is forging partnerships in the U.S., Europe and Asia, building a global network of merchants that accept its payment services. On Tuesday, it is set to announce a tie-up with the online-payments arm of Thai conglomerate Charoen Pokphand Group, people familiar with the situation said.

For now, those overseas services are aimed at a surging number of Chinese tourists who use Ant Financial's Alipay mobile-payments application at home. But by distributing its technology platform to retailers world-wide, Ant is laying the groundwork for what could eventually be a challenge to Visa Inc. and MasterCard Inc.

"I was surprised to see Alipay" at a 7-Eleven in Thailand, said Li Na, a 33-year-old Chinese startup employee who used Alipay to buy ice cream while vacationing on the island of Ko Samui in August. "It was convenient." At home, Ms. Li said she uses Alipay almost every day for shopping, dinner and taxis.

Alipay was created in 2004 to support transactions on Alibaba's Taobao online-shopping site and grew alongside the e-commerce business. It was later separated from Alibaba—an offshore company with foreign investors—and reincorporated as a domestic company under chairman Jack Ma's control, after worries that new regulations could have threatened its ability to be licensed for payments. Alipay accounts are linked to bank accounts, and users move money into Alipay to pay bills, buy movie tickets and even invest in mutual funds.

As Alipay grew, its became part of an umbrella holding company, Ant Financial, that expanded into new businesses. The payment app's huge user base and Alibaba's connections with merchants allowed Ant to move into other financial services such as loans, money-market funds and credit scoring. Alipay remains Ant's biggest business by far.

Overseas, Alipay is accepted at more than 80,000 merchants in 70 countries, according to Ant. It has set a goal of one million merchants in three years.

"Eventually, Chinese Alipay users wouldn't need to worry about money exchange or discovery of local dining and shopping information, wherever they go," said Jia Hang, an executive at Alipay's international operations.

Ant has some powerful advantages as it rolls out its business abroad. With more than 450 million users, Alipay dominates China, the world's biggest e-commerce market, handling nearly half of the estimated $738 billion Chinese spent online last year, according to iResearch. Alipay processed 153 million online transactions a day, on average, in the first quarter—almost 10 times more than PayPal Holdings Inc., nearly as many as MasterCard and around 60% of the volume of industry leader Visa, according to an Alibaba investors presentation in June.

In China, where credit cards aren't as widespread as in the U.S., hundreds of millions of consumers have turned to smartphone apps such as Alipay, making China the world's biggest mobile-payment market. Last year, mobile transactions in the country more than doubled to $235 billion, pushing it ahead of the U.S., which grew 42% to $231 billion, according to data provider Euromonitor International.

Investors hung a $60 billion price tag on the company in its latest fundraising round in April and bankers say a future initial public offering—expected as early as next year—could raise as much as Alibaba's $25 billion IPO and value Ant at around $100 billion. A spokeswoman for Ant Financial said the company doesn't have a timeline for the IPO, nor a preferred exchange on which to list.

In May, the company hired a senior Goldman Sachs Group Inc. banker, Douglas Feagin, to lead the push to build a network of global partners.

The tie-up with Charoen Pokphand's Ascend Money Holding, fits the pattern. The Wall Street Journal reported in June that Ant would buy a 20% stake in the Thai firm for an unknown amount. Last year, Ant Financial together with Alibaba paid more than $500 million for a 40% stake in Indian online-payment and e-commerce firm Paytm.

In London, Harrods department store, a mecca for Chinese tourists, accepts Alipay. Ant has also teamed up with partners such as France's Ingenico Group SA, whose in-store payment system is widespread among European merchants. Ant Financial is also working with First Data Corp. and VeriFone Systems Inc. to tap more U.S. merchants. Chinese travelers can use Alipay to pay for Uber Technologies Inc. rides and shopping at San Francisco International Airport.

Taking Alipay global isn't a slam dunk. Banking is a tightly regulated industry, meaning Ant needs to pursue alliances, such as the Ascend tie-up in Thailand or Paytm deal in India, to get access to a local market. Wooing global consumers in markets where credit-card use is widespread will likely be harder.

Competitors include rival Tencent Holdings Ltd.'s WeChat Pay at home and Apple Inc.'s Apple Pay abroad. Tencent is gaining ground in China thanks to the popularity of its WeChat messaging app, which includes a mobile wallet. In the first quarter, Tencent's share of China's mobile-payment market more than tripled to 38% from a year earlier, while Alipay's share fell to 52% from 79%, according to iResearch.

Alec Macfarlane and Julie Steinberg contributed to this article.

Write to Kane Wu at Kane.Wu@wsj.com and Juro Osawa at juro.osawa@wsj.com

(END) Dow Jones Newswires

October 31, 2016 12:35 ET (16:35 GMT)

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