What recent moves by Ant Group say about its direction

Written by Kapronasia || June 20 2023

When will Ant Group’s transformation be complete? Once China’s and probably the world’s most prominent fintech firm, the company has been caught up in political and regulatory headwinds since November 2020. Each time the light at the end of the tunnel has seemingly been in view, the expected revival of its IPO – the only definitive signal that would signal the company were out of the woods – has failed to materialize. Recent moves by Ant Group suggest that it still has some work to do before its transition to a technology company that works for the national interest is complete. That seems to be what Beijing expects of Ant.

In recent years, China has moved away from an earlier embrace of financial technology and sought to reorient some of the most prominent fintech companies to focus on areas of emerging technology that Beijing wants to prioritize. For Ant Group that means using its technological prowess for more utilitarian purposes than in the past – when it profited enormously from consumer lending and asset management.

Case in point: Ant plans to work with the city of Hangzhou, where its roots lie, to facilitate far-reaching digital transformation. Under the agreement announced in May, Ant expects to help develop the city into a leading example of China’s digital economy. The technologies involved include artificial intelligence, blockchain and “database technologies.”

To the extent that Hangzhou will draw on Ant’s fintech prowess, it will be to boost financial inclusion of SMEs. The city expects Ant’s MYBank “to play a bigger role in internet-based inclusive finance” for these firms, according to The South China Morning Post.  

Ant’s digital prowess will also be used to support the Asian Games to be held in Hangzhou in September. Alipay is the official payment partner and digital life services platform partner of the Games. It sponsored the first digital torch relay of the Asian Games in June, with over 21 million people signing up to become a digital torch bearer by searching for “Asian Games” in the app.

Separately, Ant may be considering selling a stake in its virtual banking unit in Hong Kong, according to Bloomberg. Like most of the city’s eight digibanks, Ant Bank is struggling. In 2021, Ant Bank recorded about HK$232 million (US$30 million) in losses, according to its annual report. It had HK$545,000 of loans outstanding as of December 2021, while deposits totaled HK$741 million.

Ant’s virtual bank would seemingly appeal to users of its broader ecosystem, but following its restructuring, it is unclear if the ecosystem can be leveraged in the same way as before.

Ant also has less money to spend on loss-making ventures given sharply reduced profitability.

We expect that if Ant has to choose between its Singapore digital bank, which focuses exclusively on the non-retail segment, and its Hong Kong one, it will devote more resources to the former. Singapore is becoming an increasingly important source of Chinese investment and regional hub for Chinese corporates.