The Great Fall Of ANT

Fall from a greater height is more damaging. But in business parlance, the damage depends on how fast or otherwise you bounce back. Ant group’s story tell us these lessons and more….


Ant Group was founded in 2011 by Jack Ma of Ali Baba e commerce, with its headquarters in Hangzhou, China and is the parent company of Alipay, a pioneering in digital payments firm in China. The company partnering with other financial institutions offers financial services based on open ecosystem of technologies serving to small and micro enterprises , consumers and to support the needs of the society for future. Payment and lifestyle platform “Alipay” , wealth management app “Ant Fortune” which offers a  comprehensive wealth management solutions and an private credit service “Zhima Credit”are its products. The fintech company has revolutionised personal finance across China to touch over 13 billion people ( 10 % of the population) who remined unbanked.

Ant Group- The Fintech sensation

Within a short time, Ant Group became an integral part of millions of Chinese life from making payments for food deliveries, on the spot loans, micro-investment and insurance and achieved the status of the world’s largest digital payments platform with over 8400 million users on annual basis with merchant establishment base of over 80 million stores accounting for over $17.6 trillion in payments by June 2020 crossing US giant Paypal by 25 times. With the backing of blockchain technology, the Ant chain has created a a capacity to handle one billion transactions a day.

The Regulatory Scrutiny

The strengthening of Chinese regulatory system had put the Ant Group’s largest IPO of $ 34 billion in jeopardy just few days before launch in Shanghai and Hong Kong as the group was reminded of the regulatory risk it faces due to government’s mounting scrutiny. Ant, holding, was struck down on November 2020, 2 days before the launch. The summoning of its  cofounder Jack Ma and other senior executives by the country’s central bank, the People’s Bank of China, and the China Securities Regulatory Commission (CSRC), signaled the potential risks since the Ant Group’s business was violating certain norms of the regulations. The company was ordered to carry out an extensive overhaul of its financial business.

The real issue

Though well known for funding consumers and micro lending, it was observed that less than 5 % of the credit was funded by the Ant Group the rest was underwritten by partner banks. Ant issued joint loans with other banks with very little capital ( less than 10% ) while enjoyed over  20% of net interest income. The group’s investment very little that it was risk-free income. Further over 40%  of the of revenues generated were attributed to fees earned from its lending arm while the rest was service charges for  using Alipay digital wallet.  Thus the group hasn’t taken the responsibility of correlated risks.

Regulatory action

To safeguard against financial risks and to keep the over levered institution under control, a set of draft rules were released especially for online micro lenders and the major regulation was to impose caps on the amounts that individuals can borrow and the online platform operators have to fund . The China Banking and Insurance Regulatory Commission (CBIRC) , the regulatory agency of the People’s Republic of China to Supervise the business activities of banking and insurance institutions introduced additional regulation governing online lending and joint lending by banks and fintech companies and NBFCs that they  must provide at least 30% of the capital for any online joint loan made with a bank

The slashing of the Group’s valuation

The regulatory guidelines had impacted the Ant’s credit business drastically and the main profit-making businesses has been trimmed leading to a nosedive in its valuation. The valuation prior to IPO was $235 billion was slashed to to about $70 billion according to Fidelity Investments Inc. China Cinda Asset Management Co. Ltd., valued Ant at around $58 billion to $72 billion.

Ant Group under restructuring mode

A giant stripped down after restructuring, the group is working hard on its way comply with Chinese regulators as the profitable consumer lending business has been decoupled from vast pervading payments service Alipay and shifted to consumer finance subsidiary. As a result of the overhaul and new rules, outstanding loans facilitated by Ant’s platforms dropped to 1.8 trillion yuan by mid-2022. As per the instructions of the regulator, Ant decided to transform itself into an financial holding company and  dividing its key operations into finance, internet, technology and overseas. Though the self-inspection work was nearly complete, but that there were still issues to be resolved.

Adhering to Corporate Governence

Ant Group has made certain  internal changes to improve its corporate governance, and appointed  two new independent directors in the process.

Fitch Ratings analysis

According to commentory by Fitch Ratings in January 2022, there has been advances in Ant Group’s restructuring and its impact on Alibaba Manageable. The Chinese state-owned company had injected capital and raising its stake to 50 % in Ant’s Consumer Finance Company and  renamed as Chongqing Ant Consumer Finance Co., Ltd. (CACF) and the incorporation of a financial holding company (FHC). With the government holding a larger share, it will exert greater influence and oversight on CACF’s business through the appointment of board members. Once the requsite capital is pumped in, the restructured organization will be under the regulatory guidelines .

Learners’ Opportunity     

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Discussion Question        

What do you think about government regulations on fintech? A boon, a bane or fifty fifty Why?

Key Words

#onlinembainindia #onlinembaprogram #icfaimba #icfaionlinemba #onlinemba #onlinembadegree #mbadegreeonline #onlinembacourse

Source Article ; About Ant Group , insights research brief – 4th October 2022

ET team ;  Ant Group; All you need to know about this Chinese fintech sensation – 27th October 2020

Yue Wang; China’s Ant Group Faces Regulatory Scrutiny Ahead Of Trading Debut – 3rd November 2020

Business Times team; Ant Group rebuilds for regulators, but at what cost- 16th September 2022

Kelsey Cheng- Economic Times – Ant Group rebuilds for regulators, but at what cost?- 22nd September 2022

Fitch Ratings team – Ant Group’s Restructuring Advances; Impact on Alibaba Manageable, 5th January 2022


1 thought on “The Great Fall Of ANT”

  1. Subrahmanyam says:

    Regulations are essential in financial operations for ethical and integrated operations. But they shall not become hindrance. They shall aid business activites

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