Jack Ma’s Ant demands bigger fees to rebuild valuation

{"text":[[{"start":11.92,"text":"Ant Group is demanding a larger slice of lucrative commissions from its popular payments platform at the expense of local banks as China’s largest financial technology group tries to offset losses from a government crackdown on its lending business. "}],[{"start":27.32,"text":"The move will help Ant’s controlling shareholder, Chinese billionaire Jack Ma, to rebuild the group’s valuation after Beijing in November pulled the company’s planned $37bn initial public offering, which would have been the world’s biggest. "}],[{"start":43.35,"text":"Ma has since largely disappeared from public view while Beijing has launched new rules restricting online lending as part of a wider crackdown on fintechs, which China’s President Xi Jinping signalled this month was only just beginning. "}],[{"start":58.47,"text":"Multiple lenders told the Financial Times they had agreed to allow Ant’s Alipay, China’s largest mobile payment service, to increase its share of the processing fee from transactions conducted on its platform by up to 80 per cent since the beginning of this year. "}],[{"start":74.67,"text":"Merchants in China pay a fee on each transaction made using Alipay that is split between the fintech, the customer’s bank and Unionpay, the country’s card services company. "},{"start":86.287,"text":"Alipay’s share of this fee has been increasing while that of the banks has been shrinking. "}],[{"start":null,"text":"

Ant is still looking for an IPO and it wants to improve its valuation that has taken a hit from the regulatory overhaul

"}],[{"start":92.03,"text":"Instead of using cash or swiping credit cards, most Chinese consumers make payments through mobile apps, such as Alipay, for everything from Starbucks coffees to train tickets and online shopping. "},{"start":104.834,"text":"This has given Alipay significant pricing power in what it charges for its services. "}],[{"start":111.13,"text":"Ant’s fee increase also underscores the challenges faced by Beijing in taming the fintech champion, whose dominance of online finance in China has weakened the state’s grip on the sector. "}],[{"start":123.3,"text":"“Ant has the upper hand in price negotiations because we count on Alipay to expand our business,” said an executive at a bank that works with the fintech company. "},{"start":133.529,"text":"“There is little the government can do. ”"}],[{"start":136.72,"text":"Ant did not respond to requests for comment from the FT. "}],[{"start":141.14,"text":"Ant is smarting from the crackdown on its high-margin lending business, under which the fintech takes a fee for connecting borrowers on its online platform with lenders, usually banks. "}],[{"start":152.79999999999998,"text":"According to a draft law issued last November, the fintech will need to contribute much more capital for loans it offers in partnership with banks while facing limits in raising funds from the debt market. "}],[{"start":165.32999999999998,"text":"To make up for the fall in profitability from the changes to its lending business, Ant has become more aggressive with its online payments division. "}],[{"start":174.54,"text":"“Ant is still looking for an IPO and it wants to improve its valuation that has taken a hit from the regulatory overhaul,” said a person close to the company. "},{"start":184.40699999999998,"text":"“The solution is to grow in areas that come with fewer restrictions. ”"}],[{"start":189.01999999999998,"text":"The fintech group began pursuing this tougher approach in negotiations with banks over the past few months. "},{"start":195.68699999999998,"text":"This was despite a warning from the People’s Bank of China, the central bank, in January that it would crack down on monopolistic practices in the electronics payment industry. "}],[{"start":null,"text":""}],[{"start":207.32999999999998,"text":"Official data shows Alipay counts more than 1bn active users and processes more than half of China’s non-bank electronic payments. "},{"start":216.534,"text":"That makes Ant a target for anti-monopoly regulation that aims to restrict companies to having about a third of the share of the market. "}],[{"start":224.82999999999998,"text":"The regulatory tightening, however, has done little to give banks a stronger say in negotiating with Ant. "},{"start":231.85899999999998,"text":"Several lenders said they had agreed to allow Ant to increase its share of transaction fees not only this year but also in 2022. "}],[{"start":241.54999999999998,"text":"“We can’t afford to lose a partner like Ant,” said a banker who works with the fintech group. "}],[{"start":247.39,"text":"Official data shows the nation’s mobile payment platforms, led by Alipay, reported Rmb295tn ($45.2tn) in transactions last year. "},{"start":260.669,"text":"That compared with Rmb117tn for bank card purchases in the same year. "}],[{"start":null,"text":""}],[{"start":267.86,"text":"As Alipay’s popularity keeps rising, banks are rushing to work with the platform to make their credit cards stand out from the competition. "},{"start":276.589,"text":"A Beijing-based finance executive said Chinese lenders have joined “an arms race” to offer Alipay incentives so the platform will list their credit card as the preferred partner. "}],[{"start":288.88,"text":"“There is one Alipay everyone uses and dozens of credit cards that do not distinguish themselves from each other,” said the official. "},{"start":297.134,"text":"“Who do you think has more bargaining power? ”"}],[{"start":300.15999999999997,"text":"People close to the PBoC said the central bank was considering various measures to break Ant’s monopoly. "}],[{"start":307.35999999999996,"text":"But any push to restructure the industry would require co-ordination among a variety of market participants, including Ant and its competitors, which would be difficult given their conflicting interests. "}],[{"start":319.17999999999995,"text":""}]],"url":"https://creatives.ftacademy.cn/album/001091918-1616645479.mp3"}