Banking & Finance

Marching ants

Ant Financial gears up for mega IPO


Jack Ma’s sidekick Lucy Peng

During his testimony to the US Congress last week, Mark Zuckerberg highlighted that Facebook had humble beginnings in his dorm room. But when Republican Senator Dan Sullivan suggested that Zuckerberg’s success was a quintessentially American tale (“You couldn’t do this in China, right?” he asked), Zuckerberg disagreed.

“Well, Senator, there are some very strong Chinese internet companies,” Zuckerberg replied to the dumbfounded (and ill-informed about tech) Alaskan senator. He later added, “I think that that’s a real strategic and competitive threat that, in terms of American technology policy, we should be thinking about”.

One of the companies Zuckerberg was referring to was the tech titan Alibaba. Last week, the Wall Street Journal reported that Alibaba’s affiliate Ant Financial was preparing for a $9 billion fundraising round, which would value the company at $150 billion. The fundraising is tipped to be led by Singaporean investment company Temasek, although an IPO is still not expected until next year.

Ant Financial, which operates the Alipay payment platform, took form in 2011 when Jack Ma spun the unit out of Alibaba and took ownership of it, much to the chagrin of Yahoo, one of Alibaba’s principal investors (see WiC112). Ma said he had to make the move because Chinese regulations bar foreigners from owning controlling stakes in Chinese internet payment services.

The most recent Temasek news suggests a compromise is imminent – possibly in the wake of relaxations in foreign ownership outlined last week by the Chinese central bank.

According to Analysys, Alipay accounted for 54% of China’s $17 trillion mobile payment market at the end of 2017, with rival Tencent’s WeChat Pay a little behind with 38%.

Alipay has primarily acquired users by leveraging Alibaba’s dominant e-commerce empire. In Asia, the duo are attempting to recreate that partnership. To that end, Jack Ma announced on April 8 that Alibaba co-founder Lucy Peng had stepped down as chairman of Ant Financial to focus on her new position as CEO of Lazada, the Singaporean e-commerce firm which Alibaba first invested in back in 2016 (see WiC321) but then fully acquired last month after injecting another $2 billion of capital.

Ant’s presence is multiplying further afield as well, driven by demand from affluent Chinese tourists.

The largest European department store group, El Corte Ingles, introduced Alipay to its Spanish stores this month. Meanwhile Danish payment firm Nets also announced a partnership last week to bring Alipay to the Nordic countries.

However, some of the fintech firm’s expansion plans have been scuppered. Ant’s $1.2 billion bid to buy American money transfer company MoneyGram was blocked by US regulators in January over security concerns (see WiC393).

“The challenge [of expansion] is that different countries may have different attitudes in terms of adoption of new technologies to drive financial inclusion,” Eric Jing, Peng’s successor, told the World Economic Forum earlier this year.

BlackRock co-founder and president, Robert Kapito, also warned at a separate Davos-based event this week that the US is being complacent about the commercial threat that new Chinese tech companies such as Ant pose. Kapito predicted, “This is a story that I do not think ends very well” for established Western financial companies.

Facebook has also trialled providing financial services in America. It allows users to send money through its Messenger app but its scope pales compared to Ant, which manages some $230 billion through its money market fund Yu’ebao alone (see WiC372).

More important to investors, according to the Financial Times, is Ant’s ability to “utilise the data of daily life”. Its credit scoring system, Sesame Credit, was revolutionary and is also likely to play a vital role in China’s ever-imminent “social credit” system, which will use Big Data to determine a citizen’s ‘civic decency’ and reward (or punish) based on the rating (see WiC352).

But, like Facebook, the fintech pioneer has been cautioned over its misuse of client data too. Earlier this month, China’s central bank fined Alipay Rmb180,000 ($28,670) for “inadequate customer rights protection, publishing misleading advertising and improper data protection”, China Money Network reported.

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