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Jack Ma’s Fintech Flyer has its Wings Clipped by Chinese Regulators

November 4, 2020

Just as it was on course for a record-breaking $34 billion IPO in Hong Kong and Shanghai, Ant Group has had its wings summarily clipped by Chinese regulators.

Backed by billionaire Jack Ma, China’s richest man who founded the Alibaba e-commerce empire twenty years ago, Ant is a fintech giant woven into the everyday life of hundreds of millions of Chinese people through its easy mobile payments system.

But the group, which has more than 700 million monthly active users ,has raised concerns in China’s state-controlled finance sector by heading into personal and consumer lending, wealth management and insurance.

Ant Group is the parent company of Alipay, China’s largest digital payments firm, which was founded back in 2004 by Ma,
A former teacher, Ma started out in digital sales with the Alibaba e-commerce giant but his ambitions soon turned to the potential for simplifying personal finance in China.

He had a vision of a cashless society based on “trust and credit” where buyers’ cash is held in escrow by Alipay for merchants to send their goods with a guarantee of return for any unhappy customers, from payments for food deliveries, instant loans to micro-investment and insurance, Ant has found its way into being an integral part of everyday Chinese life which now boasts one billion users, partly thanks to Ma’s gift for maneuvering his way through China’s red tape and bureaucracy.

But, he may have pushed his luck too far last month at a Shanghai business forum where he seemed to criticise regulators for being too heavy-handed and stifling technological innovation, causing criticism amongst the state media over the risks of Ant becoming too big.
Ant’s reach is Humongous, It is the world’s-largest digital payments platform, with over 730 million monthly users on the Alipay app using more than 80 million stores , that equates to $17.6 trillion in payments as of June this year, a staggering 25 times more than US giant PayPal.

It’s leading the way with blockchain technology and claims it has a capacity to match one billion transactions a day on the so-called Ant Chain, Its financial products have revolutionised personal finance across a country where around 10 percent of the population remains unbanked.

Although, Its supercharged success may be behind its sudden regulatory woes.

The fintech industry has come under state scrutiny in China, with new state regulations introduced to contain potential risks in its growing online lending industry, an area in which Ant has been rapidly expanding in.

Just as the IPO looked set to roll, regulators pulled the plug and informed Ant it couldn’t continue until it complied with new capital requirements, the Shanghai Stock Exchange cited “changes in the fintech supervisory environment” late Tuesday, halting the sale, which was also called off in Hong Kong.

Just a day earlier Ma and Ant senior executives were summoned to a rare joint meeting with the country’s central bank and three other top financial regulators, prompting speculation they had been firmly put in their place.

Recently Chinese state media have started issuing warnings about potential financial instability that could come from Ant Group’s rapid growth, as well as taking aim at Mr. Ma’s comments about over-regulation.

Jack Ma stood to make a staggering $27.8 billion from his 8.8 percent stake in Ant if the share sale had gone through. Instead, a severe drop in Alibaba’s share price in Hong Kong and New York has taken a sizeable bite out of his fortune, estimated at around $2.6 Billion dollars.

For now, it seems investors must play the waiting game.

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