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Ant Financial extends dominance in Chinese online finance

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Ant Financial has revealed a surge to more than 600m users and disclosed for the first time the scale of its wealth management business, in information for potential investors in its latest $10bn fundraising.

The document, seen by the Financial Times and confirmed by two investors, underscores the extent to which the fintech arm of Jack Ma’s internet giant Alibaba dominates online finance in China, as well as the challenge it poses to the country’s banks.

In the memo, Ant claims a rise in user numbers to 622m. Alipay, Ant’s core payments arm, cites 520m users on its website, while an estimate from Barclays for the end of 2017 gave the number at 600m.

According to the document, the Ant Financial Services group’s wealth management business now has assets under management of Rmb2.2tn ($345bn) — a figure not previously disclosed that would make Ant the world’s largest consumer wealth management platform. Of that sum, Rmb1.5tn sits in Yu’E Bao, the world’s biggest money market fund.

“AFS is a technology disrupter to the financial services industry that has achieved enormous scale in a short period of time,” the document says.

Wednesday, 16 May, 2018

Ant is seeking about $10bn in its latest funding round, which would value the company at about $160bn. Investors say the fundraising is already oversubscribed.

But the information for investors also highlights a potential drawback for the company. Ant is attracting regulatory scrutiny from Beijing about the scale of its threat to the core business of the state-owned lenders, despite the company’s insistence that it is more a partner than a threat to the banks.

“Over the past year, regulators have put a lot of emphasis on the booming fintech area,” the note says in a discussion of risks. “AFS, being the single biggest player in the space, will be exposed to some business model transformation under new rules.”

Regulatory changes are expected to affect both its payments and wealth management business. In the section on regulatory effects on its operations, the memo predicts that Ant’s money market fund will grow at only 6 per cent per year, reaching Rmb2tn in 2023.

The document also reveals Ant’s growing international presence and its expansion plans both at home and abroad.

It describes Ant as “a techfin conglomerate holding significant equity interests in some of the world’s most promising unicorns to form an ecosystem that is effective on a global scale. Its Indian payments arm, Paytm, has grown in a mere 30 months to become the fourth-largest in the world.”

The company plans to expand into online insurance as well as car and supply chain finance.

Businesses likely to be threatened by Ant’s ambitions range from local banks to international companies such as Mastercard and Visa, the memo adds.

Ant declined to comment.

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