As the IPO Looms, Everything You Need to Know About Jack Ma’s Ant Group

Photographer: Qilai Shen / Bloomberg

Billionaire Jack Mas Ant Group is poised to carry out what could be the largest initial public offering in history by simultaneously listing in Hong Kong and Shanghai. It is said that it seeks a valuation of $ 225 billion, making it the fourth largest finance company in the world.

A 2011 offshoot of Chinese giant Alibaba Group Holding Ltd., the company has defined and dominates the Chinese payments market through its ubiquitous Alipay app. It also manages the giant money market fund Yu’ebao and the Huabei and Jiebei consumer loan units.

Headquartered in Hangzhou, a sprawling metropolis south of Shanghai, its ambitions go far beyond finance. Here is a thumbnail view of the business units and the challenges the company faces.

Alipay: a $ 17 billion machine

The world’s largest digital payment platform was created in 2004 as an escrow service for Alibaba to secure transactions on the e-commerce site. For consumers who are wary of online payments, the service was a success and quickly spread to other platforms.

The mobile version, launched in 2009, once had 75% of the market, but has seen its share drop to roughly 55% in competition with WeChat Pay from Tencent Holdings Ltd.

Alipay has 711 million active users, mainly in China, who take advantage of it to buy everything from a quick coffee to a property, generating $ 17 billion in payments in the 12 months to June. But it is also less and less important to Ant, contributing 36% of its revenue in the first half of this year, up from more than 50% just two years ago.

Losing ground in the payment market was one of the reasons why Ant canceled a previous plan for an IPO as early as 2017, people familiar at the time said. Now it is a much more diversified company.

Huabei and Jiebei: a loan party

For those who do not have cash available to spend through Alipay, Ant operates services that make small unsecured loans: Huabei (Just Spend) and Jiebei (Just Lend). The former focuses on quick consumer loans for the purchase of iPhones and refrigerators, while the latter finances everything from travel to education.

Ant uses part of his capital for these loans, but most of the money comes from the banks, and the company acts as a gateway. The platforms made loans to approximately 500 million people in the 12 months to June, charging annualized rates on their smallest loans of around 15%. Its loans could grow to nearly 2 trillion yuan by 2021, according to Goldman Sachs Group Inc.

The firm’s CreditTech business, which includes Huabei and Jiebei, is its largest revenue generator, contributing 39% of the total in the first six months of the year.

The company is now applying for a license to establish a consumer finance company. The new entity would increase Ant’s creditworthiness, as consumer finance companies can lend 10 times their capital, far outpacing the two to three times leverage of Ant’s existing microcredit companies.

Yu’ebao: the great stash

With hundreds of millions flocking to Alipay, Ant in 2013 created a money market fund that allowed people to earn interest on the cash they parked in the app, investing as little as 1 yuan. Tianhong Yu’e Bao Money Market Fund is one of the world’s largest of its kind with approximately $ 173 billion in assets. But it has regressed since its heyday after regulators stepped in to limit the amount that each investor can put into the fund.

In 2018, Ant opened the platform to third parties. Now offers fund options from 20+ asset managers. Has partnered with companies including Invesco Ltd., which has seen a fund grow 300 to 400 times its size in March. This year, Ant partnered with Vanguard Group will offer a theft advisor to allow the US giant to advance in China.

Yu’ebao’s unit in Ant accounted for 15% of revenue this year, which has not changed in the last three years.

Credit score

Taking advantage of the wealth of data it is gaining on borrowing and spending patterns, Ant started a credit rating service in 2015 called Zhima Credit. If users opt for the service, Ant performs transaction history checks and also uses data from third-party providers to verify creditworthiness. Ant charges a fee to companies that take advantage of the service, and if customers score high enough, they can avoid paying deposits on everything from renting a bike or booking a room at hotels like Marriott.

Xianghubao: insurance for pennies

Many ants form a powerful colony. In 2019, the company entered the insurance market and created a healthcare product called Xianghubao that allows people to pay a small monthly fee that is bundled together to help cover the treatment costs of members affected by diseases such as cancer, Alzheimer’s and even Ebola.

Ant’s Insuretech unit also sells insurance premiums from third-party companies, and takes a cut. The unit’s revenue increased 47% to 6 billion yuan in the first half, representing 8% of total sales.

Global headwinds

Ant had big plans for the United States, but now they have been frozen due to increasing trade and political tensions between the world’s two superpowers. Ma in 2018 gave up on her promise to create 1 million jobs in the US.

Instead, Ant has focused its offshore ambitions on building its presence in the rest of Asia, where it is working with nine payments startups, including the owners of Paytm in India and GCash in the Philippines, targeting billions of people. It also seeks to link more overseas merchants to use Alipay, so that its Chinese customers can use it while traveling.

Controversies: Yahoo!