What Is Ant Group?

Ant Group is a large Chinese financial services and technology company that is closely affiliated with Alibaba, the giant Chinese ecommerce site. Ant was founded in 2004 and then spun off as a separate company in 2014. Alibaba still owns a 33% stake in Ant. Ant is the parent company of Alipay, China's largest mobile payments platform, which was created largely to facilitate spending on Alibaba.^[1]

In addition to Alipay, Ant provides wealth management, credit reporting, banking and cloud computing to millions of small business and consumer customers.^[2]

Although about 95% of Ant's business is confined to China, that is a huge market, and Ant ranks as one of the largest financial services companies in the world. Until its aborted initial public offering in 2020, which was expected to be the largest in history, Ant was believed to be valued at around US$310 billion, or about the same as JPMorgan Chase, the largest U.S. bank, and well ahead of Citigroup and Goldman Sachs.^[3]

Mobile Payments

Alipay enables shopping on Alibaba and elsewhere in China through its mobile phone app, which uses a Quick Response (QR) code on the user's phone, which is then scanned by the merchant.^[4]

Alipay controls more than half of China's mobile payments market, the largest in the world, processing more than 100 million mobile transactions each day. Its biggest competitor is WeChat Pay, which is owned by Alibaba's rival, Tencent. It also has partnerships with some American companies that allow Chinese customers to use Alipay to pay for transactions while visiting the U.S.^[5]

Ant handled more than US$17 trillion in digital payments in mainland China during the 12 months that ended in June 2020. By contrast, PayPal says its total payment volume in 2019 was US$712 billion. The company said it processed 459,000 payments a second during the 2019 "Singles Day" shopping holiday. By comparison, Visa says it can process 65,000 transactions a second. Alipay has more than 730 million monthly users, more than twice that of PayPal, which has 346 million active accounts.^[6]

Lending Business

In addition to processing all those transactions, Ant makes loans to both small businesses and consumers, although it doesn't fund the loans itself. Rather, the funds are provided by small regional Chinese banks that partner with Ant, which receives a small fee for each loan. The banks, of course, bear the risk of default.

The company has originated more than US$300 billion in loans to consumers and small businesses.^[7]

The small business loan operation, called MYbank, made loans to 21 million small businesses in 2019, or about one out of four privately owned businesses in the country. The app claims it can make automated credit decisions within seconds of receiving an application, which only takes a few minutes to complete. On the consumer side Ant offers both point-of-sale loans and personal unsecured loans, also sourced through a network of small regional banks.^[8]

In addition to payments processing and lending, Ant is also a big player in wealth management, with over RMB4 trillion (US$560 billion) of customer assets. About a quarter of that total is held in the company's huge Yu'e Bao ("leftover treasure") money market fund. It also offers mutual funds and insurance products, also through partnerships with about 100 insurance companies.^[8]

Failed IPO

Ant Group planned to come to market in November 2020 with what was expected to be the largest IPO ever, but at the last minute Chinese government regulators abruptly cancelled the offering. The IPO was scheduled to be conducted jointly between the Shanghai and Hong Kong stock exchanges. The dual listing was expected to raise US$37 billion, easily topping the US$29.4 billion raised by the Saudi state oil company Aramco in December 2019. That would have valued the company at more than US$310 billion.^[9]

According to press reports, China pulled the plug on the deal over concerns that Ant's financial empire was getting too big and that Alibaba founder Jack Ma, who still owns a large stake in Ant, was becoming too powerful.^[9]

To rein in Ant, in September China's banking regulator had proposed requiring the company to put up US$30 for every US$100 in consumer and business loans it originates. This would have forced the company to "significantly" increase the capital it needs to support the lending unit.^[10]

At this stage, it's not clear when—and if—Ant will go through with its IPO and what conditions it would have to meet to get the government's approval.

Summary

Ant Group is a large Chinese financial services and technology company that was spun off in 2014 from its owner, Alibaba, the giant ecommerce site, which still owns 33% of the company. Ant's main subsidiary is Alipay, a mobile app that controls more than half of all mobile payments in China, the world's biggest market.

Ant is also a large lender to small businesses and consumers in China and also provides wealth management, insurance and other products and services. Ant planned an IPO in 2020 that would have been the largest in history until Chinese regulators aborted the sale at the last minute on concerns about the company's size and potential risks to the country's financial system.