Ant Bows to Beijing Pressure
China’s central bank met with representatives of the fintech company on Monday, as well as officials from other regulatory agencies. The bank said the regulators have been overseeing the formulation of a “comprehensive, viable rectification plan” for Ant over the past several months.
The move comes after the fintech company faced a number of regulatory challenges and suspension of its initial public offering (IPO) in November. Ant Group was preparing to sell more than $34 billion worth of shares and list in IPO, but China suspended the deal after Ma publicly criticized China’s financial regulators.
The Wall Street Journal published a report in January saying Ant was looking to meet regulatory obligations and overhaul its business to become a financial holding company. Last year, former President Donald Trump considered blacklisting the fintech business in the US following the IPO.
Additionally, Ant also said it plans to start a licensed personal credit reporting company, as well as fold its major online lending platforms Jiebei and Huabei into a regulated customer finance company. The fintech company said its payments business will keep serving consumers and small firms.
“We will put our growth proactively within the national strategic context,” Ant said and added it would “strive to create societal value.”
The unveiling of Ant’s revamp plans comes after its sister company Alibaba Group paid a record $2.8 billion fine after China’s antitrust regulator accused it of abusing its market dominance which resulted in harming rivals, merchants, and customers. Furthermore, the ecommerce business giant also agreed to overhaul its business and comply with fair competition rules.
Following months of dealing with immense regulatory hurdles, both Ant Group and Alibaba are now striving to appease regulators and move on with their operations.
Ant Group was preparing for its IPO last year with a monster business valuation of over $300 billion, which is higher than the market values of the world’s largest banks. In 2018, the fintech company hit a $150 billion valuation after a large private funding round. Prior to its scheduled IPO, Ant said its business revenues soared 40% to $17 billion.
The company’s chairman and CEO Eric Jing said Ant will not drop the continuity and quality of its services while meeting regulations. Jing was reappointed as Ant’s CEO last month after another top executive Simon Hu left the company. Jing said Ant will not hike costs for consumers and the financial companies it becomes partners with.
Former banking regulator Ji Shaofeng said the government’s efforts to tighten its grip over Ant Group could limit future developments in the fintech sector.
“Putting everything under the scope of a financial regulator tends to discourage further technological innovation,” Shaofeng said and added Ant will be required to handle uncertainties and new regulations that are still being formulated.
Chinese fintech business Ant Group said it is planning to overhaul its businesses and become a financial holding company overseen by the country’s central bank, following China’s drive to rein over tech companies. Last year, the fintech company canceled its IPO plans just days before the scheduled double listing in Shanghai and Hong Kong after state regulators voiced their concerns.
About the Author
Luigi Wewege is the Senior Vice President and Head of Private Banking at Caye International Bank. Outside of the bank, he serves as an instructor at the FinTech School which provides online training courses on the latest technology and innovation developments within the financial services industry. Luigi is also the published author of "The Digital Banking Revolution."