The figure of Ant Group's mascot. Photo / AP
One of China's most influential tech companies, the internet finance titan Ant Group, is poised to raise a boatload of cash by selling shares.
The sale puts another stamp on China's importance as a digital powerhouse. But it also shows how the tech world is fracturing.
The company could be worth more than many global banks after its share sale, yet its business is highly concentrated in just one country: China. Instead of listing in New York, as many other Chinese internet companies have done, Ant is going public in Hong Kong and Shanghai.
Here's what to know about the company and its initial public offering.
Around the turn of the millennium, the internet was a lawless frontier, not least in China. Online shopping was a gamble. Buying and selling took place largely between strangers. Nobody could be sure they weren't being defrauded.
Alibaba, the Chinese e-commerce group, had an idea for cultivating trust. In 2003, it created a service called Alipay that held on to payments until buyers confirmed that they were satisfied with their purchases. If the items were fake or never arrived, the money was refunded.
Alipay helped Alibaba's bazaars take off. Jack Ma, Alibaba's co-founder, spun the service out in 2011 as a separate company, setting off a tiff with Yahoo, which was then a major Alibaba investor.
Today, Alibaba owns a one-third stake in Ant. Ma is Ant's controlling shareholder, although he is not part of its management.
Ant's executive chairman, Eric Jing, and chief executive, Simon Hu, both worked for years in Alibaba's orbit. Ant has 16,660 employees.
When people across China want to pay for something, they don't reach for their wallets. They grab their phones.
With Alipay and another smartphone app, the social platform WeChat, exchanging money is a matter of scanning a QR code — at an in-person cashier, during checkout at an online store or face-to-face with a friend. Shops and restaurants still accept cash, though often begrudgingly.
Over time, Alipay has come to host other services, too. People in China use it to shop on credit — no plastic card required. They take out small loans, invest their savings and buy health and life insurance. Fees from those businesses accounted for more than half of Ant's revenue last year.
Alipay has more than 730 million monthly users, more than twice the US population. By comparison, PayPal has 346 million active accounts.
Ant handled more than US$17 trillion ($25.4t) in digital payments in mainland China during the 12 months that ended in June. PayPal says its total payment volume in 2019 was US$712 billion. Ant also enabled around US$300b in credit to consumers and small businesses.
When the company goes public, it could be valued around US$310b. That would make it worth about as much as JPMorgan Chase, and much more than Citigroup and Goldman Sachs.
Alipay is no slouch technologically, either. Ant says its systems processed 459,000 payments a second at the peak of a Chinese shopping holiday last year. Visa, by contrast, says it can handle 65,000 transactions a second.
Ant is huge not only because China's population is huge. Its growth was also helped by the fact that China had previously been so far behind in digital finance. Few people had credit cards. The big government-run banks were slow to modernise.
Around 95 per cent of Ant's revenue last year came from mainland China. The company has invested in Paytm, an Indian payment app, and acquired EyeVerify, a startup in Kansas City, Missouri, that makes biometric authentication technology. But for now at least, Alipay seems unlikely to implant itself so deeply in another country's financial system.
Even in China, the government is wary about fast-growing financial products. The Communist Party has clamped down on lending fraud and questionable investment schemes. Regulators have also criticised Ant for not adequately protecting users' personal data.
The fact that Ant has survived for so long in China under regulatory pressure means it will probably continue working around whatever the authorities throw at it, said Kevin Kwek, an analyst with the research firm Bernstein.
"If you're going to sell anything to consumers that's financial services, the regulators have to scrutinise it," he said. "I don't think they're trying to find ways to kill Ant."
Written by: Raymond Zhong
© 2019 THE NEW YORK TIMES