The days appear to be numbered when a Chinese consumer could use their Alipay app as an one-stop shop to do everything from buying groceries and train tickets to taking out a loan and investing in a mutual fund, as the government takes aim at fintech giants over monopolistic behavior, risky lending practices and data privacy.
Ant Group and the financial authorities have agreed on a wide-ranging rectification plan that may become a template for its peers to follow as policymakers pursue a multifaceted campaign.
Here’s what we know about Ant Group’s plan so far. There are five main aspects to the rectification:
- Restructuring the group into a financial holding company that will incorporate all the subsidiaries engaged in financial activities and be subject to the regulations on such entities released by the State Council and the PBOC in September 2020.
- Addressing unfair competition practices in the payments business. This will involve stripping the Alipay third-party payments platform back to its origins as a payment services provider, removing Ant Group’s financial products including Huabei and Jiebei from the platform and delinking them from the Alipay payments infrastructure.
- Consolidating lending operations. This will involve putting all the group’s lending businesses into Chongqing Ant Consumer Finance, which is 50% owned by Ant Group. The company already has a consumer finance license although it hasn’t yet started operating. Huabei and Jiebei, currently run by two Ant Group microlending companies registered in Chongqing city and regulated by the local government, will be incorporated into the consumer finance company that will be regulated by the CBIRC.
- Overhauling the personal credit reporting business. This will involve setting up a company that will apply for a personal credit reporting license and be subject to the PBOC’s upcoming “Measures for the Management of the Credit Reporting Business.”
- Ensuring compliance with financial watchdogs’ prudential regulatory framework, improving corporate governance and rectifying illegal financial activities to control excessive leverage and the risk of contagion.
- Managing and controlling liquidity risks for fund products and reducing the size of Yu’e Bao, China’s biggest money-market fund platform chiefly run by Tianhong Asset Management, which is 51% owned by Ant Group.
Source: Nikkei Asia news