July 6, 2015
Chinese e-commerce company Alibaba Group that offers a host of services through its web portals is carving the way forward to become the country’s (and perhaps the world’s) all-rounder company. And on its way there, it is letting investors and state-run institutions jump in. Ant Financial, a subsidiary of Alibaba has closed the Series A funding round which included the country’s largest pension fund—the National Social Security Fund (NSSF) besides some unnamed Chinese insurance majors. Valued at $45-50 billion, Ant Financial is a one-of-a-kind offshoot from a multi-billion e-commerce company like Alibaba. 37% of Ant Financial is owned by Alibaba and the rest is controlled by founder and executive chairman of the Alibaba Group, Jack Ma. Those of you not familiar with the name Ant Financial might know it by its erstwhile name, Alipay. Under Ant Financial is one of the world’s largest FinTech company—Alipay, an investment service named Yu’E Bao, an online credit scoring service known as Sesame Credit and the recently floated MYBank that offers loans based on the transaction history of the group’s customers.
Ant crawled out of Alibaba in 2011, as a result of strict Chinese rules for foreign ownership of financial services entities. Now, a state backing will be very useful because the Chinese government firms have an iron grip on the banking and financial services industry and have often blocked private entities from entering the market. NSSF’s involvement with the deal is particularly interesting as it recently relaxed regulations on how the fund can invest. This marks the first time Ant Financial has undertaken such an investment decision. The investment option—which also included a substantial discount for NSSF as part of Ant’s CSR values—will bring a strategic investor on board that could help Ant in the future with legal and regulatory hurdles. Past reports indicated that the Chinese payments giant is looking to raise up to $4 billion in addition to selling around an 11% stake (could not be confirmed till the time of writing the article).
With its well-entrenched set of investors, Ant has joined the ranks of most valuable technology companies of the world like American car-hailing service Uber and Chinese smartphone maker Xiaomi, each of which is valued at about $50 billion. Current serving over 400 million customers, Ant runs China’s dominant online payments platform Alipay, private Internet bank MYbank, microloan unit and the country’s largest money market fund Yu’E Bao which takes care of $150 billion and more in assets. In addition to this, it has now entered the online-to-offline logistics business where it has teamed up with its parent company Alibaba to draw nearly close to $1 billion into a joint venture called Koubei. It is also considering spreading its wings outside China after buying a 25% stake in Indian firm Paytm in a $1 billion deal.
In his first interview with foreign media, Ant Financial CEO Eric Jing said that the company aims to help smaller businesses, consumer and partners and spark innovation and become the strongest growth engine for global internet finance. However, Ant isn’t the only one to take its empire from commerce and Internet services into digital finance. Rival Tencent (which offers digital bank and provides financial services) and e-commerce firm JD.com (which offers micro loans to SMEs and entrepreneurs in China in partnership with America-based ZestFinance) are some other players that Ant will have to watch out for.