Beijing to break up Ant’s Alipay and force creation of separate loans app

Beijing wants to break up Alipay, the superapp owned by Jack Ma’s Ant Group which has more than 1bn users, and create a separate app for the company’s highly profitable loans business, as it intensifies a crackdown on China’s big tech groups.

Chinese regulators have already ordered Ant to separate from its main business the company’s two lending units — Huabei, which is similar to a traditional credit card, and Jiebei, which makes small unsecured loans — into a new entity and bring in outside shareholders.

Officials now want these lending businesses to have their own independent app as well. The plan would also require Ant to turn over the user data that underpins its lending decisions to a new and separate credit scoring joint-venture that would be partly state-owned, according to two people briefed on the process.

“The government believes big tech’s monopoly power comes from their control of data,” said one person close to financial regulators in Beijing. “It wants to end that.”

The move may slow Ant’s lending business, with the enormous growth of Huabei and Jiebei partly powering its planned IPO last year. The CreditTech arm, which includes the two units, overtook Ant’s main payment processing business for the first time in the first half of 2020, to account for 39 per cent of the group’s revenues.

The size of the unit, which helped to issue about one-tenth of the country’s non-mortgage consumer loans last year, surprised regulators who fretted about predatory lending and financial risk.

Alibaba shares closed down 4.2 per cent in Hong Kong trading on Monday after the FT published an earlier version of this story. The Hang Seng Tech index, which tracks the biggest Chinese tech groups listed in the city, shed 2.3 per cent in the face of renewed regulatory pressure on the sector.

Ant has been struggling with regulators for control of the new joint venture, but a compromise was reached under which state-owned companies in its home province, including the Zhejiang Tourism Investment Group, would hold a majority stake.

The provincial government did Ant a favour by pushing for local state-owned groups to become its new partners, the people said. 

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“Given the mutual trust between Ant and Zhejiang, the fintech group will have a big say on how the new JV operates,” said a former official at the People’s Bank of China. “But the new set-up will also make sure that Ant listens to the party when it comes to critical decision-making.”

A person close to Ant said that for the time being Ma’s team would be at the helm of the new venture. “What does Zhejiang Tourism Investment Group know about credit scoring — nothing,” the person said, while noting Ant executives were still concerned they could lose control in the future.

Reuters first revealed the make-up of the joint venture reporting that Ant and Zhejiang Tourism Group would each take 35 per cent stakes with other state-owned and private partners allocated smaller shares.

The new venture will apply for a consumer credit scoring licence, which Ant has long coveted. China’s central bank has issued only three licences — all to state-run operations — preventing Ant from fully monetising the vast reams of data it has collected on Chinese citizens.

But under the plan being considered, Ant will lose its ability to independently assess borrowers’ creditworthiness. For example, a future Alipay user in need of credit would see their request first routed to the new joint venture credit scoring company where their credit profile is held and then on to the new Huabei and Jiebei lending app to issue the credit.

Currently the process is entirely integrated within Alipay and Ant said it made “credit decisions within seconds” in its prospectus for its suspended IPO. The company did not respond to an emailed request for comment.

Ant will not be China’s only online lender affected by the new rules. 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, one of the people said.

A senior executive at a different online lender said this could translate into a “moderate” cut in their margin since the firm could no longer use its own data to make lending decisions.

Additional reporting by Hudson Lockett in Hong Kong