Tighter regulation may also weigh on Ant’s ability to grow in China.
For all the company’s attempts to rebrand itself as a technology firm (a more lightly regulated industry), it still looks more like a financial-services business, as my colleagues Shuli Ren and Anjani Trivedi have written. The company’s Yu’E Bao money-market fund, which grew to become the world’s largest, has already had its wings clipped by Beijing’s financial watchdogs. A quick trawl through Ant’s 674-page prospectus shows just how much attention this issue is consuming: “Regulation” appears almost 500 times.
China, China, China
Against this backdrop, Ant identified cross-border expansion as one of the four uses for its IPO proceeds. The company intends to enhance its international
payment capabilities, invest in technology and develop more digital payment, finance and daily-life services for consumers, merchants and partners beyond China, according to the filing.
Tourism has been key to the extending reach of Alipay and WeChat Pay. China
was the world’s largest source of overseas tourists in 2018, and also the world’s largest spender, driving increased acceptance of the Chinese payment apps in cities from Paris to Bangkok. Post-IPO, Ant faces a dramatically changed environment, with the Covid pandemic having sent the global tourist industry into cold storage.
Geopolitics, meanwhile, was a problem for the company even before U.S.-China tensions reached cold-war levels. In early 2018, Ant scrapped its takeover of MoneyGram International
Inc. after the U.S. raised national security concerns. The company also backed out of a promise to create 1 million jobs in the U.S., with Ma blaming the trade spat between the countries. The IPO filing devotes three pages to geopolitical risks, most centered on the U.S. Unlike its shareholder Alibaba
Group Holding Ltd., Ant decided against selling shares in New York, opting instead for a dual Hong Kong and Shanghai listing. It still may be exposed to potential future U.S. sanctions, though.
Since the MoneyGram deal collapsed, the company has mainly focused on its Asian backyard. Even here, progress faces hurdles. India banned dozens of Chinese apps in June, following a border clash. Alibaba’s UC Browser was banned, though Ant-invested Paytm has escaped sanction. Southeast Asia, where mobile payments and credit card penetration are relatively low, offer more opportunities, though homegrown competition from the likes of Singapore’s Grab and Indonesia’s GoJek is on the rise.
A fast-growing business with 1 billion customers and a seat at the cutting edge of financial technology is creating understandable excitement. Investors should temper that with a recognition that Ant’s future may be a lot harder than its past.