The worst for Jack Ma has come: Forced to split up a lucrative business with more than 1 billion users, the state will take a stake in the new venture

Tram Ho

Beijing wants to split Alipay, a super app with more than 1 billion users owned by Jack Ma’s Ant Group, and create a separate company for the highly profitable lending business, Nikkei reported. . This is the latest development in the restructuring of the fintech giant.

Chinese regulators have ordered Ant to separate its two lending businesses: Huabei, which is similar to a traditional credit card, and Jiebei, which makes small unsecured loans. In addition, the authorities also required the company to attract more outside shareholders.

Now officials also want the two businesses to be separated into a standalone application. The plan would also require Ant to turn over user data that underlies its lending decisions to a new, partly state-owned credit-scoring joint venture, two sources familiar with the matter said.

Điều tồi tệ nhất với Jack Ma đã đến: Bị buộc chia tách mảng kinh doanh béo bở với hơn 1 tỷ người dùng, nhà nước sẽ nắm cổ phần ở liên doanh mới - Ảnh 1.

A person close to financial regulators in Beijing said: ” The government believes that the monopoly power of big tech companies comes from their control over data. And Beijing wants to stop  that “.

The move could slow down Ant’s lending business, given the massive growth of Huabei and Jiebei. CreditTech, the managing arm of the two apps, overtook Ant’s main payment processing business for the first time in the first half of 2020, accounting for 39% of the group’s revenue.

The scale of this array is so large that the regulatory agencies are also amazed. Specifically, it issued about a tenth of the country’s unsecured consumer loans last year. The issue raises concerns about financial risk.

Alibaba shares fell as much as 5.9% in Hong Kong trading on Monday.

Ant has struggled with regulators for control of the new venture, but an agreement has been reached under which state-owned companies in its home province, including Zhejiang Tourism Investment Group, will hold the majority of shares.

According to residents, the provincial government has supported Ant by promoting local state-owned corporations to become its new partners.

A former official at the People’s Bank of China said: ” Given the mutual trust between Ant and the Zhejiang government, the fintech company will have a big say in how the new venture operates. , the new setup will also ensure that Ant listens to the authorities when making important decisions.

A person close to Ant said that for the time being, Jack Ma’s team of employees will be running the new venture. ” What does Zhejiang Tourism Investment Group know about credit scoring? Nothing ,” the person said. However, in the future Ant executives could still lose control.

The composition of the new joint venture will be Ant and Zhejiang Tourism Group, which will each hold a 35 percent stake, with other public and private partners allotted smaller shares, Reuters reported.

The new venture will apply for a consumer credit scoring license, something Ant has long craved. China’s central bank has issued just three licenses – all for state-run operations – that prevent Ant from monetizing the vast trove of data it has collected on Chinese citizens.

But under the plan under consideration, Ant will lose the ability to independently assess the creditworthiness of borrowers. Example: A future Alipay user in need of credit will see their request first go to the new joint venture credit scoring company where their credit record is kept and then to the app for new Huabei and Jiebei loans for credit.

The process is now fully integrated within Alipay, and Ant said it made a “credit decision within seconds” in its prospectus for its suspended IPO last year.

Ant will not be the only Chinese online lender affected by the new regulations. 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.

A senior executive at another online lender said this could in turn cause a “moderate” drop in their profit margins as the company is unable to use its own data. to make lending decisions.

Source: Nikkei

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