The deal failed to gain approval from the Committee on Foreign Investment in the United States (CFIUS) 'despite extensive efforts to address the Committee's concerns', according to a statement from MoneyGram.
Alex Holmes, chief executive officer of MoneyGram, said: "The geopolitical environment has changed considerably since we first announced the proposed transaction with Ant Financial nearly a year ago. Despite our best efforts to work cooperatively with the U.S government, it has now become clear that CFIUS will not approve this merger. We are disappointed in the termination of this compelling transaction, which would have created significant value for our stakeholders."
With the merger off the table, MoneyGram and Ant Financial have instead formed a 'strategic business cooperation' with plans to work together to develop strategic initiatives in the remittance and digital payments markets.
The two companies said they will collaborate to 'provide their respective customers with user-friendly, rapid-response and low-cost money transfer services in China, India and the Philippines, among other Asian markets, as well as in the U.S. and other key regions around the world.'
Doug Feagin, president of Ant Financial International, said: "Establishing this new strategic cooperation with MoneyGram will add a partner with global remittance capabilities to our ecosystem and, while Ant Financial won't have a direct ownership relationship with MoneyGram, we look forward to working closely with the MoneyGram team to make our platform even more accessible - particularly to unbanked and underserved communities globally - and create even better experiences for our customers."
The merger deal was struck in January last year, with Ant Financial offering $880m to purchase MoneyGram’s network of 350,000 outlets in 200 countries. The Alibaba affiliate company increased its bid to $1.2m in April.