Ant Group's Alipay forced to separate business units

The Chinese government is planning to create a separate app for Alipay's loans business, and has ordered Ant Group to separate its two lending units from its main business, according to a report from Financial Times.  The report said Beijing hoped to break up the superapp Alipay owned by Jack Ma's Ant Group which has over one billion users.It ordered Ant Group to separate Huabei, similar to a traditional credit card, and Jiebei, which offers small unsecured loans, into a new entity and bring in outside shareholders.

Also, the Chinese government wanted these lending companies to have an independent app, while it also hoped to require Ant Group to turn over user data that underpins its lending decisions to a new and separate credit scoring joint-venture. The report cited a source that this joint-venture would be partly state-owned. The report also cited a source close to financial regulators in Beijing, who said the Chinese government believed big tech's monopoly power came from their control of data and the authority hoped to end that. Also, the CreditTech arm of the company, which includes the two units, overtook Ant Group's main payment processing business for the first time in the first half of 2020 to account for 39% of the group’s revenues.

Ant Group has been facing regulations from the authority for the new joint-venture, but a compromise was reached as state-owned companies in its home province, including the Zhejiang Tourism Investment Group, would hold a majority stake. While the fintech giant is likely to have a notable say on the new venture, it will also keep Ant Group in line when it comes to critical decision-making.

Following the report, Hong Kong-listed shares of Alibaba, Ant Group’s e-commerce affiliate, fell more than 4% .

Previously, Reuters revealed the composition of the joint venture. Ant Group and Zhejiang Tourism Group would each take 35% stakes with other state-owned and private partners allocated smaller shares. The new joint venture will apply for a consumer credit scoring licence. However, under the new plan, Ant Group will lose its ability to independently assess borrowers’ creditworthiness as currently the process is entirely integrated within Alipay. Ant Group said it made credit decisions within just seconds before. 

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