Tencent buys 5% stake in Australian buy-now-pay-later firm Afterpay

FILE PHOTO: People visit Tencent's booth at the World 5G Exhibition in Beijing, China, Nov. 22, 2019. REUTERS/Jason Lee/File Photo

(Reuters) - Chinese gaming and social media group Tencent Holdings has bought a 5% stake in Afterpay Ltd, the Australian buy-now-pay-later firm said on Friday.

Tencent’s shareholding in the Australian firm was worth about A$390 million ($251.55 million), based on Afterpay shares’ closing level on Friday.

The Chinese tech giant, which owns stakes in video game companies Riot Games and Supercell and has exposure to food delivery and e-commerce verticals, said had said earlier this year earlier this year it would focus more on smart retail and payment platforms in the future.

Its instant messaging platform WeChat also allows users to make payments and book flights and hotels.

“Afterpay’s approach stands out to us not just for its attractive business model characteristics, but also because its service aligns so well with consumer trends,” Tencent Chief Strategy Officer James Mitchell said.

Buy-now-pay-later service providers have gained popularity, mainly with millennials, as they allow payment for goods through interest-free installments, helping customers sidestep stringent rules associated with getting a credit card or loan.

Melbourne-based Afterpay has also grown its customer base considerably in the United States, which is proving to be a key market as it taps the influential but largely nascent region.

Tencent’s stake in Afterpay was built from the end of March through April, a filing to the Australian Securities Exchange showed.

Reporting By Rushil Dutta in Bengaluru; editing by David Evans and Shinjini Ganguli