The resurgence of the world’s largest group of fintech ants
- A year after the failed IPO which was to be the largest of its kind, Ant Group Co began making it clear to clients whether they borrow from outside lenders or from the company itself.
About a year ago, in December 2020, Beijing launched an in-depth restructuring on Ant Group – just one month later Derail the group’s US $ 37 billion mega IPO. Chinese regulators were ironically concerned about the financial model of the fintech conglomerate. Ant Group had no choice but to obey.
By February 2021, a restructuring plan has been agreed between Ant Group and Chinese regulators under which the fintech giant will become a financial holding company. The plan essentially asks Ant to reorganize its lending business, among other changes that would subject it to the same set of regulations governing financial institutions.
Almost a year later, in November 2021, the Alibaba-affiliated group announced that it was close to completing the restructuring of its popular consumer credit products. Let’s take a look at how the financial arm of the Ant Group, once a shining example of how a large-scale fintech could serve a major financial market, operated before it was forced to rethink its plans, and how she is today.
Ant Group’s pre-failure IPO
To learn more about the scale of its offerings, Ant – which is 33% owned by Alibaba Group Holding Ltd. – processed more financial payments than any other business in the world. He performs the largest mobile payment platform, the world’s largest money market fund. It’s also the world’s largest financial technology organization, and worth far more than any of China’s four big state-owned banks.
In essence, Ant Group created financial products to serve the underserved masses, including payments, credit, health insurance, and investments. Undoubtedly, its products were very popular among Chinese consumers and small businesses – among the main reasons Chinese watchdogs went off the rails. its mega IPO two days before the listing scheduled for November of last year.
According to the firm prospectus filed last year, credit products contributed nearly 40% of Ant’s revenue in the six-month period ended June 2020. Major products include Huabei (“spend”), launched in 2014 for the daily expenses of consumers, much like a virtual credit card. Then, a year later, came Jiebei (loan), a credit product for larger consumer transactions.
Based on the old model, Ant created loans that were then taken out by third-party banks and other financial institutions. The company’s prospectus shows that as of June 2020, around 98% of Ant’s credit balance from its platform was underwritten by its partner financial institutions or securitized.
This means that Ant financed only 2% of the 1,730 billion yuan in loans, or the equivalent of US $ 271 billion alone. Collectively, the two products were used by around half a billion people in China and accounted for nearly a fifth of the country’s outstanding short-term debt as of June last year, a the Wall Street newspaper report indicated.
How does the Group work today?
The overhaul had forced Ant Group to form a new consumer finance company along with several other companies in June of this year. Ant has also integrated its credit business into the new entity. According to various reports, since the beginning of last month, Ant has started to differentiate between Huabei and Jiebei products based on the source of funding.
The separation is based on the requirements of the regulations governing Ant’s new consumer finance company. Simply put, loans financed in whole or in part by Ant will continue to carry the Huabei and Jiebei brands. Meanwhile, consumer credit services funded by other financial institutions will be called Xinyonggou, which means “buy on credit”. Likewise, consumer loans financed by other financial institutions will be referred to as Xinyongdai, or “credit loan”.
the Newspaper reported that Ant, in a letter to users, said that “the brand differentiation will expand to cover more users” and recommended that users prioritize Xinyonggou over Huabei, because the former has a larger line of credit.