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Fintech 13 Mar 2017

Ant Financial, the largest fintech in the world

Alibaba’s payments arm is playing a key role in the company’s success. But Ant Financial is much more than just that: it is the biggest fintech in the world. The company recently achieved a market valuation that more than doubles Airbnb’s value and is almost  on par with Uber’s capitalization.

Whereas the dragon may be the quintessential Chinese icon – a symbol of power, strength and luck – the country may very well have to start thanking a mighty ant, Ant Financial, for much of its success in the eCommerce and fintech arena. And it is a quite powerful ant: Last year Ant Financial closed a $4.5 billion funding round, placing the company’s market value at almost $60 billion, which doubles AirBnb’s and is almost on par with Uber’s. Figures don’t lie: Ant Financial is the biggest fintech in the planet. But, what exactly is Ant Financial?

Ant Financial – and its online payments platform Alipay – is Alibaba’s financial services arm. Alibaba is China’s top eCommerce company, which posted a quite impressive set of results in 2016: $15.69 billion in revenues and an EBITDA of $8.12 billion, up 33% and 28% from last year, respectively. Also, Ant Financial controls 70% of the mobile payments market in China. Alipay has a network of close to 100,000 retailers in 70 countries and regions, including France and Germany.

As of today, Alipay is a pivotal part of Ant Financial’s business, but the company is quickly expanding in other areas, including asset management and lending.  And to grow in these different branches of the fintech business, the company is building on the soundest foundation a company could wish for: a user base of 450 million people, many of which use Alipay to pay for a sizeable chunk of the 175 million transactions that Alibaba processes every day.

Ant Financial’s ambitions to become a financial marketplace have led the company to embark on an international shopping spree. Last January, Ant Financial agreed to pay $880 million to buy MoneryGram, the U.S. remittances leader. It has also invested in India’s Paytm, Thailand’s Ascent Money and South Korea’s Kakao Pay. The icing on the corporate strategy cake will be the company’s IPO, which it is expected to announce sometime this year.

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Alibaba's app

But as much as they are linked to Alibaba’s success, Alibaba’s riches owe a lot to China’s digital finance boom.  It is not by chance that China is home to more than a handful of powerful fintech companies, led by Ant Financial.

The reasons for this, according to a recent report by Citi, are four: high penetration of digitization, combined with a weak financial infrastructure for SMEs; quick growth in number of internet users, especially mobile; solid middle class growth; and much less strict regulations than in Western economies.

The differences between the level of regulation that Chinese and western companies face when venturing into the fintech business seems to be key in the sector’s future. As Douglas Jiang, Fintech Lead at IDG Capital, a global network of technology funds with almost $7 billion in assets under management, says in the same report revisited “China’s internet giants owe much to their success in the fintech universe to the relaxed regulatory environment they enjoy. But in the Western world, being too big to fail may be one of the reasons that is holding back the so-called GAFAs (Google, Apple, Facebook and Amazon). Also, their interest in operating in highly regulated environments may be dubious.” The result is that, according to Jiang, GAFAs only focus on less-regulated fintech segments. And that’s good news for the Chinese dragons – and ants.

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