Here’s why Ant Group is on the verge of breaking IPO records

HONG KONG – Stella Su, who lives and works in Shanghai, has only used an ATM once last year. Instead of cash, in recent years she has done almost all of her business using the Alipay digital wallet – shopping at a mall, buying stuff online, or transferring money to friends.

“Now when I go out I don’t even need to carry my wallet, all I need is my phone,” said Su, one of Alipay’s over 1 billion users. in China and abroad.

Alipay, operated by Ant Group, is the world’s largest and most valuable financial technology (fintech) company and one of the two dominant Chinese digital wallets in China, the other being Tencent’s WeChat Pay rival.

Thanks to the enormous scale and potential of the Chinese fintech landscape, Ant Group is set to raise around $ 34.5 billion in the world’s largest equity offering, breaking Saudi Aramco’s previous record of 29, $ 4 billion. Prior to the IPO, the company will be valued at around $ 280 billion.

To appeal to Chinese and global investors, Ant Group lists its shares in both Shanghai and Hong Kong. It is expected to start shipping in Hong Kong on November 5. The Shanghai debut has yet to be announced.

Even before announcing its IPO plans, Ant Group was the world’s most valued fintech company, with a valuation of $ 150 billion after raising funds in 2018.

“Ant Group is much more than PayPal which only processes financial payments. He has a lot of companies in other fields and with other services that would help 1.3 billion people in China, ”said Jackson Wong, director of asset management at Amber Hill Capital Ltd., in a statement. interview. “We bet that Ant Group will be able to grow at a very high rate in the future.”

Alipay and WeChat Pay have helped make the Chinese company virtually cashless, at least in major cities, with consumers and merchants relying on digital payments using their phones.

“Think of Alipay as Visa, MasterCard, Citibank, Fidelity…” On the Alipay platform, you pay for things, you buy insurance, you buy wealth management. Your whole life revolves around Alipay.

Walk into a supermarket in China and it would be difficult to find a customer looking for change to pay for groceries. Instead, cashiers scan a QR code on a customer’s smartphone to deduct money from their Alipay or WeChat Pay digital wallets. The transaction takes a few seconds.

In restaurants, groups of friends often split the bill by transferring money to each other using their digital wallets, much like the Venmo app is used in the United States.

“Ant Group is so valuable because Alipay is used by a billion people every day for all of their purchases,” said Rein. “The scale of fintech in China overshadows the potential for regular financial transactions in the United States.”

Alipay evolved from e-commerce giant Alibaba, which was founded by Jack Ma in 1999 to help match buyers and sellers in China’s rapidly growing market. When Alibaba launched the Taobao consumer e-commerce platform to compete with eBay in China, Alipay was touted as a payment method to build user confidence in the platform. Today, Alipay’s reach extends to almost every aspect of life related to money.

Ma’s foresight has made him the richest person in China, with an estimated fortune of $ 58.8 billion according to the Hurun Research Institute, which tracks the country’s rich.

Alipay was established in 2004 to serve as an escrow service between buyers and sellers on Alibaba’s online consumer platform, Taobao. He held the funds from the buyers to be returned to the sellers after receipt of the goods. Alipay’s revenue comes mainly from transaction fees charged to merchants. Users can link their bank cards directly to Alipay to top up their wallets, and transfers can also be withdrawn from users’ bank accounts.

Alibaba, which currently owns a third of Ant Group, parted ways with Alipay in 2011. The company was later renamed Ant as the company expanded its range of financial services.

One of them is Zhima Credit – a private credit scoring system that rates the reliability and creditworthiness of its users based on data such as whether users pay their bills on time through Alipay.

Zhima’s credit scores can help people take out small loans from Ant Group Consumer Credit Services, Huabei, and Jiebei, to finance iPhone purchases or school expenses. Such loans are extremely popular in China, where credit card usage is low and most people have no official credit history and are unable to borrow from banks.

Ant Group’s money market fund, called Yu’e Bao – one of the largest in the world – allows people to put unused money in their Alipay wallets to work and reap returns on investments as small as 100 yuan ($ 15).

“In the past, wealth management products offered by banks had many requirements, perhaps a minimum of 50,000 yuan (about $ 7,500),” said Chen Zhoumin, who works at a bank in Zhengzhou, a city in central China’s Henan Province. “But Alipay has made it very convenient to invest the money, because it has made wealth management accessible and convenient.”

To compete with Yu’e Bao, banks have started offering more flexible investment products with lower capital requirements, said Chen, who often invests unused cash in Yu’e Bao because it’s easy to do. .

“Digital wallets like Alipay and WeChat have revolutionized payments in China,” he said. “Now we are also less worried that we will get counterfeit banknotes or that our wallets will be stolen or stolen, because everything is now digital. “

PA reporter Alice Fung in Hong Kong and researcher Chen Si in Shanghai contributed to this report.

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