The former financial subsidiary of Alibaba is said to be listed on the Shanghai and Hong Kong stock exchanges and not on Wall Street. The financial company processes a payment volume that is 25 times greater than that of PayPal.
Posted today at 8:10 p.m.—
The Ant Group logo on the headquarters building of the financial giant in Hangzhou, China.
Foto: Long Wei (VCG/Getty Images)
It should be by far the largest IPO in the world: Ant Financial, the finance company of the Chinese online wholesaler Alibaba, is expected to make its stock market debut in Hong Kong and Shanghai this week. More than 34 billion dollars are to be collected. That would be significantly more than when the oil company Saudi Aramco started trading last year, which brought in 29.4 billion dollars and which is so far the largest IPO in the world.
It all started in 2004, shortly after Alibaba founder Jack Ma launched the Taobao website, China’s counterpart to Ebay. In contrast to the American auction house, Taobao adapted to the needs of Chinese users and introduced its own online payment system: Alipay.
Trust account against distrust
Those who traded on Ebay at the time had to be able to trust – that the seller would send the auctioned goods and that the buyer would actually pay. Many Chinese do not have this trust, too often they have been disappointed. With Alipay, the deposited money was only passed on when the goods had actually arrived at the customer; that’s how long the money stayed with Alibaba. A kind of escrow account.
In the meantime, it is hard to imagine China without Alipay. You can pay with the service anywhere in the People’s Republic. To do this, the user scans a QR code with the smartphone and the money is transferred, in the supermarket as well as at the cookshop. Even beggars often have a code on paper with them. In the past fiscal year, the company processed payments totaling 118 trillion yuan, around 16 trillion francs – almost 25 times more than PayPal, the largest online payment platform outside of China.
The split and its reasons
In 2011, Alibaba spun off its financial subsidiary Alipay. The reason was quite pragmatic: the authorities had asked for a Chinese banking license. For Alibaba that was a hopeless undertaking at the time, as the group had two large foreign anchor shareholders with Softbank (Japan) and Yahoo (USA).
First the financial subsidiary was called Alibaba e-Commerce, then Ant Small and Micro Financial Services and finally only Ant Group, which has long been much more than a payment processor.
Ant Financial is the most important sales channel for financial products in China and grants consumer loans that can be booked on the smartphone in no time. Ant Financial also arranges loans for small and medium-sized companies. This is attractive for all those business people who do not get any money from the state banks.
The gap in the market
China’s big money houses are actually not real banks, at best state-run pawn shops. The authorities give the institutes exactly how much they are allowed to lend on a monthly basis. In order not to get into trouble and to keep administrative costs as low as possible, many banks prefer to give their loans to state-owned corporations. These take away a lot of money at once, and if necessary the state is liable anyway.
The middle class, the actual backbone of the Chinese economy, on the other hand, receives hardly any loans and sometimes has to refinance themselves with obscure shadow banks, which charge significantly more interest. Ant Financial now gives 5 percent of all loans to medium-sized businesses. The market share for consumer loans is 15 percent.
The strict Chinese capital controls prevent Ant Financial from gaining a foothold worldwide.
The parent company Alibaba had chosen the New York technology exchange in 2014 for its own initial listing. In the meantime, however, relations between the People’s Republic and the United States have deteriorated dramatically. That should be an important reason why Ant Financial is not going public on Wall Street, but in Hong Kong and Shanghai.
Otherwise, Ant Financial’s business is very much focused on China. Here and there you can pay abroad with Alipay, but this offer is aimed primarily at Chinese tourists. The strict Chinese capital controls prevent Ant Financial from gaining a foothold worldwide. According to the law, each citizen can only import or export the equivalent of $ 50,000 a year. There is great fear in the apparatus that large sums of money will leave the country and the economy will lose its liquidity.
Posted today at 8:10 p.m.-
