It is said that the Chinese authorities have demanded a fundamental reform of their business from Ant Group, which operates an electronic payment service Alipay. In a statement on December 24, 2020 (local time), China’s state market supervisory administration said it would initiate an investigation into the Alibaba Group on charges of monopoly activity. The Alibaba Group said that it will actively cooperate with regulatory authorities’ investigations, and that all projects are operating normally.
Ma Yun, chairman of Alibaba Group, wrote a bitter voice in October 2020 that the Chinese authorities’ regulations in the fintech sector were too strict, which is believed to have led to the ban on Ant Group IPOs. After the success of the payment service Alipay, Ant Group was expanding its service range to financial products such as asset management, loans, and insurance. However, according to the announcement on December 27, 2020, the Chinese authorities instructed the Alibaba Group to only provide payment services. Although the authorities’ demand is not a request for dissolution of the company, it can be seen that Ant Group may have to put out several product lineups in the future.
According to the Ant Group business plan, 63% of Ant Group’s income in the first half of 2020 was from digital financial technology platforms and 36% from electronic payment services. The reason for the rapid growth of financial services revenues is that financial institutions have fees when users make loans, which is putting pressure on financial institutions, according to Chinese authorities.
Although Ant Group recorded a market capitalization of $315 billion before the withdrawal of its IPO in November, it can be said that a decrease in the market capitalization is inevitable according to the decision of the authorities. In addition, while the Antdroop digital finance business grew 57% year-on-year, the payment business growth rate was only 13%, and the company’s growth is likely to be suppressed. Related information can be found here .