Ant Financial Services Group, operator of Alipay, China’s biggest online payment platform by market share, is shifting its focus from payments and consumer finance to tech services, as regulators tighten their clampdown on financial risk, Reuters reports, citing four sources with knowledge of the matter.
The news comes as the four-year-old Ant, controlled by Alibaba Group Holding Ltd. founder Jack Ma, is widely expected to launch a mega initial public offering (IPO) in China and Hong Kong in 2019, though Ant has neither publicly set a timetable nor chosen a likely stock exchange.
Spun off from Alibaba when the group went public in New York in 2014, Ant is the dominant player in payments and consumer finance in China. It has diversified over the years into financial services including micro-lending, credit rating, asset management and online banking.
Reuters said the company plans to accelerate the shift to tech services within the next few years, owing to increasing regulatory pressure on Ant’s core financial offerings.
According to confidential company projections viewed by Reuters, technology services, including helping banks and other institutions with services like online risk management and fraud prevention, will make up 65 percent of Ant’s revenue in five years, up from an estimated 34 percent in 2017.
On the other hand, revenue from payments is projected to shrink from an estimated 54 percent in 2017 to 28 percent in five years, while that from financial services is seen shrinking from 11 percent to 6 percent during the period.
Despite the shift in focus, Ant’s overall revenue is expected to grow 40 percent annually from 2017 to 2021.
Reuters quoted one source saying that the growing size of Ant and other private financial firms has raised concerns among regulators, who want to make sure that these fast-growing firms do not present systemic problems to the domestic economy in case they fail.
Ant Financial was singled out by the People’s Bank of China as the only online finance firm for a trial program to test stricter regulations on financial holding conglomerates, two of the sources said.
“As a non-bank, non-state-owned institution in China, it’s not allowed to independently grow too big to manage,” one of the sources said.
An Ant spokesman said: “Every aspect of the technology we have developed will one by one be opened up to current and potential partners.”
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