China plans to break up Ant's Alipay

China plans to break up Ant's Alipay
Photo: 15.09.2021 364

According to FT publication, the Ant Group, a subsidiary of Alibaba, will be asked to abandon the Alipay payment service and create a separate lending application. The state will partly own the new project.

Alipay is currently used by over a billion people. Service revenue makes up a considerable chunk of Ant Group's profits, accounting for 39 per cent in the first half of 2020. In addition, ten per cent of all consumer loans in the country were disbursed through the application last year.

Chinese regulators have already ordered the fintech giant to spin off the back end of its two lending projects, Huabei and Jiebei, from the rest of its financial services and attract new shareholders. The server side of the site is responsible for storing and processing data. According to the government's plan, Huabei and Jiebei will be merged into a separate annexe, partly owned by the state. This means that Beijing will have the user data that underpins lending decisions. "The government believes the big tech companies gained monopoly power because of control over [users'] data," a source close to China's financial regulators told the Financial Times. "It wants to end this."

However, Ant Group managed to compromise with the authorities on the issue of control over the new service. In Zhejiang province, the company's homeland, local authorities made a concession and motivated local state-owned enterprises to become partners in the forthcoming loan project. Several of these firms will own a controlling stake. "Given the mutual trust between Ant and Zhejiang, the fintech group will have a big impact on how the new joint venture works," said a former official at the People's Bank of China. "But the new structure also ensures Ant listens to the party's voice when it comes to making big decisions." According to a staff source, owner Jack Ma's team will remain at the helm of the project.

The new rules will affect all online lenders in China. In the summer, the central bank told industry participants that lending decisions should not be made based on firms' data but using data from a separate authorized company to assess customers' creditworthiness. 

Sources: Reuters website

digital markets  China 

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