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Beijing wants to break up Alipay, the 1bn plus-user superapp owned by Jack Ma’s Ant Group, and create a separate app for the company’s highly profitable loans business, in the most visible restructuring yet of the fintech giant.
Chinese regulators have already ordered Ant to separate the back end of its two lending businesses, Huabei, which is similar to a traditional credit card, and Jiebei, which makes small unsecured loans, from the rest of its financial offerings and bring in outside shareholders. Now officials want the two businesses to be split into an independent app as well.
The plan will also see Ant turn over the user data that underpins its lending decisions to a new credit scoring joint-venture which will be partly state-owned, according to two people familiar with the process.
“The government believes big tech’s monopoly power comes from their control of data,” said one person close to financial regulators in Beijing. “It wants to end that.”
The move may slow down Ant’s lending business, with the enormous growth of Huabei and Jiebei partly powering its planned IPO last year. The CreditTech unit, which includes the two units, overtook Ant’s main payment processing business for the first time in the first half of 2020, to account for 39 per cent of the group’s revenues.
The size of the unit, which helped to issue about one-tenth of the country’s non-mortgage consumer loans last year, surprised regulators who fretted about predatory lending and financial risk.
Ant has been struggling for control of the new joint venture with regulators, but in June a compromise was reached that will see state-owned companies in its home province, including the Zhejiang Tourism Investment Group, holding a majority stake.
The provincial government did Ant a favour by pushing for local state-owned groups to become its new partners, the people said.
“Given the mutual trust between Ant and Zhejiang, the fintech group will have a big say on how the new JV operates,” said a former official at the People’s Bank of China. “But the new set-up will also make sure that Ant listens to the party when it comes to critical decision-making.”
A person close to Ant said that for the time being Ma’s team would be at the helm of the new venture. “What does Zhejiang Tourism Investment Group know about credit scoring — nothing,” the person said, while noting Ant executives were still concerned they could lose control in the future.
Reuters first revealed the make-up of the joint venture reporting that Ant and Zhejiang Tourism Group would each take 35 per cent stakes with other state-owned and private partners allocated smaller shares.
The new venture will apply for a consumer credit scoring licence, which Ant has long coveted. China’s central bank has issued only three licences — all to state-run operations — preventing Ant from fully monetising the vast reams of data it has collected on Chinese citizens.
But under the plan being considered, Ant will lose its ability to independently assess borrowers’ creditworthiness. For example, a future Alipay user in need of credit would see their request first routed to the new joint venture credit scoring company where their credit profile is held and then on to the new Huabei and Jiebei lending app to issue the credit.
Currently the process is entirely integrated within Alipay and Ant said it made “credit decisions within seconds” in its prospectus for its suspended IPO. The company did not respond to an emailed request for comment.
Ant will not be China’s only online lender affected by the new rules. This summer the central bank told industry players that lending decisions must be made based on data from an approved credit scoring company rather than proprietary data, one of the people said.
A senior executive at a different online lender said this could translate into a “moderate” cut in their margin since the firm could no longer use its own data to make lending decisions.