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Singapore
Southeast Asia could feel acutely the fallout from regulatory brakes hit in Ant Group’s $ 34 billion initial public offering (IPO), a development that is expected to slow down the fintech giant’s global expansion efforts.
The group’s portfolio companies in the region include Indonesia’s Dana e-wallet, Bukalapak e-commerce site, and most recently Wave Money in Myanmar. Its biggest sponsor, Alibaba, has invested in major e-commerce companies Lazada and Tokopedia and is reportedly considering a US $ 3 billion deal with Grab.
Ant’s original strategy was to create a multi-jurisdictional digital wallet through which users and businesses could transact with each other from anywhere in the world.
This has already proven extremely challenging in Southeast Asia, where the fintech space is crowded and localization is key, said Zennon Kapron, director of fintech research and consulting Kapronasia.
Now, there will also be great distractions. The sudden suspension of Ant’s double listing in Shanghai and Hong Kong, which will become the world’s largest IPO, came amid regulatory concerns about the fintech giant. Now Ant is expected to put his global ambitions on hold as he rushes to get his house in order, observers said.
China has been tightening its grip on fintech companies in recent months. On Monday, the central bank and regulators issued draft rules on online microcredit, which would impose stricter capital requirements and operating rules on some of Ant’s consumer credit businesses.
While the details are unclear, any funding restrictions or higher capital requirements at Ant are likely to hit the company’s expansion, investment and acquisition capacity, both domestically and outside of China.
“No degree of success abroad will be able to make up for the loss in the domestic market, because the scale is so much larger,” Bloomberg analyst Ling Vey-Sern told The Business Times. “Ant’s priority, first and foremost, is to arrange its domestic business according to the wishes of the regulator. Expansion abroad will become secondary.”
This could limit the support the group extends to its foreign portfolio companies. Even before the suspension of its IPO, the Alibaba-backed fintech giant had already been cutting funds and support staff from many of the e-wallet firms it had invested in, Reuters reported last month.
Forrester analyst Meng Liu believes that even as the struggle with regulations has an immediate impact on expansion plans, the company must aggressively tap into international markets if it is to continue its high growth trajectory in the coming years. years.
At home, in addition to arch-rival Tencent, tech companies like Meituan and ByteDance are already infiltrating the fintech space and could represent serious competition for Ant.
Ant Group could benefit from planting its roots more abroad and leveraging a broader network beyond China, especially through branching out into neighboring countries in Southeast Asia.
Although its track record in Southeast Asia is debatable, the region is still considered a key battleground for the fintech giant. Chinese companies have been looking to take advantage of rapid growth in emerging markets here, where the tech ecosystem has yet to reach the level of maturity seen in China.
Forrester’s Liu told BT that Ant is likely to continue its bid for a digital banking license in multiple jurisdictions, including Singapore, which will be a crucial step in creating its expansion into Southeast Asia.
Now that China seems hell-bent on making its stance on fintech regulation clear, it could give Ant more room for Ant to proceed clearly for any expansion it undertakes. One of the key uncertainties around it has always been how it will regulate itself, as a tech company or as a finance company. Regulators seem to be leaning towards the latter.
“Nobody prefers to build a house on loose ground. With all your risks resolved and managed, you will have a solid foundation to take all other strategic directions,” said Liu Genping, partner at Vertex Ventures.
“Also, a clearly regulated business in the domestic market, which means less uncertainty and less unclear risks, always makes it easier for the company to approach foreign partners and regulators.
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