From Ant to Unicorn – perspectives on Ant Group and the Chinese financial system

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Ant Financial

In what’s likely to be the largest IPO in global finance, Ant Group filed recently its listing documents in both Hong Kong Stock Exchange and Shanghai’s STAR Market. The parent company of Alipay generated 21.92 billion Yuan in profits during the first half of 2020, on revenue of 72.53 billion yuan. In the 12 months to June 30, the total payment volume reached 118 trillion Yuan. The financial technology conglomerate is the number one unicorn in the world, carrying a valuation of $200 billion. Although a fundraising target was not specified, they plan to sell not less than 10% stake, split between the two markets.

The information provided in the IPO filling gives a lot of insights about the fintech giant and shows clues about the future – with deep implications in the global financial system. Beyond the Alipay universe, the group is diversifying its business focus and intends to use the funds in research, innovation, blockchain technologies, development of new markets and digitization of the finance system.

A solution-based beginning

Innovation is the keyword when we analyze the evolution of the Ant Group. Back in 2004, it all started with a payment method for Alibaba shoppers: instead of making a transfer directly to the vendor, the amount would be retained until the buyer verifies that the product arrived safe and sound. Even today, this is Ant’s core product, called Alipay. It expanded very fast and started to be used outside Alibaba four years later. At that point, other services were included in the app, for example, payment of house bills – water, gas and electricity. In 2010, Alipay was formally separated from the Alibaba group, an important but controversial decision for many analysts and shareholders. The expansion became even faster: partnerships with Chinese Banks and Institutions, biometric payments, purchase of train tickets, insurance and investments in the app, opportunities for loans to consumers and small business. In 2016 it was created Ant Forest, a green initiative aiming to turn activities in the app into real trees planted in China.

Having numerous financial services in one app only brought convenience and speed to daily operations. Year after year, the number of users increased exponentially: 50 million in 2007 to 300 million in 2010, and finally 1.2 billion in 2019, most of them in Asia. In the last few years, Ant also became more international and built partnerships with other payment startups in the region – Paytm in India, GCash in the Philippines and Dana in Indonesia, among others.

Currently in China, Alipay is the most popular digital app for payments, representing more than 50% of the mobile payments market. There are 100 million mobile transactions on Alipay every day. About 33% of the Fintech giant is owned by Alibaba Group Holding, with Jack Ma as its largest shareholder.

What’s next

More than putting in evidence the recent tension between China and US with the choice of venue and concerns about future relations, the announcement ratifies Ant’s interest in developing other types of business, in particular blockchain and digital currency.

Six years ago, the Chinese Government announced the plan for a new digital currency system and in 2017 Ant Group was invited to be one of the participants in the project. More details about the digital renminbi in our next article.

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