Beijing will split Ant Alipay and force the creation of a separate loan application

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Ant Group Update

Beijing hopes to split Alipay, a super app with more than 1 billion users owned by Jack Ma’s Ant Group, and create a separate app for the company’s high-margin loan business, which is the most obvious so far for the fintech giant Reorganization.

Chinese regulators have ordered ants Separate the back Two of its loan businesses ended, namely Huabei, which is similar to traditional credit cards and Jiebei, which provides small unsecured loans, withdrew from its remaining financial products and introduced external shareholders. Now officials hope that these two businesses will also be split into a separate application.

According to two people familiar with the matter, the plan will also allow Ant Financial to transfer user data that supports its loan decisions to a new credit scoring joint venture, which will be partially nationalized.

“The government believes that the monopoly power of large technology companies comes from their control of data,” said a person close to Beijing’s financial regulator. “It wants to end that.”

This move may slow down Ant Financial’s lending business, as the huge growth of North China Settlement North, to a certain extent, provided the impetus for its initial public offering last year. The CreditTech division, which includes these two divisions, surpassed Ant Financial’s main payment processing business for the first time in the first half of 2020, accounting for 39% of the group’s revenue.

The size of the sector helped to issue about one-tenth of the country’s unsecured consumer loans last year, surprising regulators worried about predatory loans and financial risks.

Ant Financial has been vying with regulators for control of the new joint venture, but reached a compromise in June that state-owned enterprises including Zhejiang Tourism Investment Group will hold a majority stake in it.

People familiar with the matter said that the provincial government helped Ants by promoting local state-owned groups to become Ant’s new partners.

A former official of the People’s Bank of China said: “Given the mutual trust between Ant and Zhejiang, the fintech group will have a great say in how the new joint venture will operate.” “But the new setting will also ensure that Ant is at the key point. Heed the opinions of the party in decision-making.”

A person close to Ant Financial said that Jack Ma’s team will now be in charge of this new enterprise. “How much does Zhejiang Tourism Investment Group know about credit scores — nothing,” the person said, noting that Ant Financial’s executives are still worried that they might lose control in the future.

Reuters First revealed The report on the composition of the joint venture stated that Ant Financial and Zhejiang Tourism Group will each hold 35% of the shares, and other state-owned and private partners will allocate smaller shares.

The new joint venture will apply for a consumer credit scoring license, which Ant Financial has dreamed of.The Central Bank of China only issued three licenses-all to state-owned enterprises-to prevent Ant Financial Fully monetized It collects a lot of data about Chinese citizens.

However, according to the plan under consideration, Ant Financial will lose the ability to independently assess the creditworthiness of borrowers. For example, Alipay users who need credit in the future will see that their requests are first routed to the new joint venture credit scoring company, where their credit files are, and then to the new North China and Jiebei Lending App to issue credit.

Currently, the process is fully integrated within Alipay, and Ant Financial stated in its prospectus for the suspension of the IPO that it “made a credit decision within a few seconds.” The company did not respond to an emailed request for comment.

Ant Financial will not be the only online lending institution in China affected by the new regulations. One of the people familiar with the matter said that this summer, the central bank told industry insiders that loan decisions must be based on data from approved credit scoring companies, not proprietary data.

An executive at another online lender said this could lead to a “modest” cut in its profit margins because the company can no longer use its own data to make loan decisions.

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