What a whirlwind vacation for Jack Ma and his fintech Rich. The People's Bank of China, the country's central bank, invited the Ant Group to regulatory talks on December 26th and announced a comprehensive plan for the fintech company to "correct" its regulatory violations.
The meeting took place less than two months after the Chinese financial authorities abruptly halted a record-breaking public offering of Ant for complying with the company's regulations. The company, which started as a payment processor for Alibaba's online marketplaces and was spun off in 2011, lacked a solid governance structure, defied regulatory requirements, was illegally involved in arbitrage, excluded and injured competitors who were taking advantage of their market advantage consumer rights, said the central bank.
At the same time, Jack Ma & # 39; s e-commerce giant Alibaba is under investigation by China's leading market regulator for alleged monopoly behavior.
The banking authority set a five-point compliance agenda for Ant, which is overseen by Alibaba's billionaire founder Jack Ma. The fintech company should return to its roots in payments and create more transparency in transactions. Obtain the necessary licenses for its lending operations and protect user privacy; establish a financial holding and ensure that it has sufficient capital; Revision of credit, insurance, asset management and other financial transactions in accordance with legal requirements; and improve compliance with the securities business.
After the closed meeting, Ant said it had set up an internal "rectification workforce" to meet all regulatory requirements.
The move could take months and likely hurt Ant's valuation, which exceeded $ 300 billion at the time of its planned IPO. For example, the government recently announced plans to raise the bar on third-party technology platforms like Ant to provide credit to consumers, a segment that accounts for about 35% of Ant's annual revenue. The proposed change, part of Beijing's efforts to control the country's debt risks, also includes a new requirement for online micro-lenders to provide at least 30% of the loan they co-fund with banks, putting pressure on Ant's cash flow could.
Some remain optimistic about Ant's future. “[Ant] creates a lot of value. In the long run, the temporary IPO suspension will have limited business impact, ”Bill Deng, founder of cross-border payments company XTransfer and former managing director of Ant, told TechCrunch.
“From the regulator's point of view, [Ant ]’s credit size is getting so large that it goes beyond the old regulatory limits. To some extent, it has also harmed the core interests of traditional financial players, ”he added.
The crackdown on Ant has undoubtedly sent a warning to the rest of the industry. In a surprise move, JD.com's fintech unit, a challenger to Ant, appointed their former chief compliance officer to lead the fintech company as its new chief executive officer.
Tencent also has a sprawling fintech business, but it may not get the same level of control as the social and gaming giant is "not nearly as aggressive" as Ant in its fintech venture, a Tencent partner said. 39; s fintech overseas business that did not want to be named.