According to the Financial Times, Chinese officials are considering separating Alipay’s lending businesses (known as Huabei and Jiebei) from the group’s “super app,” which has more than 1 billion users.
China will Reportedly Break Up Ant Group’s Alipay and Force Creation of New Loans App
The government wants the lenders to use their own app, and it wants Ant to share user information used in making lending decisions with a new credit score joint venture.
According to FT’s sources, Ant and state-owned firms in Zhejiang, the province where it was founded, will run the JV. The two groups have strong mutual links.
According to one insider, the government was looking to break up the monopoly the company held by collecting data on every single lender in the world.
Two weeks ago, Reuters and Asia Financial broke the story that Chinese government agencies were planning to establish a personal credit-scoring agency to handle Ant Group’s vast trove of data.
Stocks of Alibaba Fall
Alibaba’s stock dropped by more than 4.2% on Monday after news broke that the company might spin off its lending subsidiary, Alipay. In the end, the Hang Seng Technology Index fell 2.43 percent.
Many experts have been sounding the alarm about the imminence of this very action. They also predict it would have a chilling effect on the company’s loan division, which is expected to generate 39% of the group’s income in the first half of 2020.
Huabei functions similarly to a prepaid debit card, and Jiebei offers unsecured personal loans of up to 3,000 RMB.
The business practises and profit margins of internet lending platforms have been the subject of heated discussion for years.
Some online payment companies have been called “predatory,” and critics have claimed that students are being “fleeced” by these companies due to their high interest rates.
In January, the central bank announced proposed regulations for the fintech industry, warning that monopolistic firms will be broken up.
Article 57 of the rules states that the PBoC can propose that the State Council’s anti-monopoly law-enforcement agencies split the institutions based on payment business types to prevent market dominance abuse and centralization if a non-bank payment institution in a dominant market position fails to follow the principles of safety, efficiency, honesty, and fair competition and the healthy development of the payment service market is seriously affected.
Reportedly under consideration by regulators, Alipay’s lending app for Huabei and Jiebei would first need to request a check of a user’s credit profile from the JV it would operate with Zhejiang Tourism Investment Group and other state and private partners (or not).
Conclusion
A credit scoring business recognised by the People’s Bank of China must be used in place of an organization’s own internal evaluations when making loan decisions, the bank has said.
In July, the central bank said that other payment service providers would be subject to the same anti-monopoly sanctions that had been applied to Ant Group.
