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The Ant Group or: Is a Tesla for the financial sector emerging in China?
In a few days, the Ant Group will be listed on the stock exchanges in Hong Kong and Shanghai. It will be the biggest IPO of all time with a company you’ve probably never heard of. But the Chinese ant could rock the financial world.
Ant Group? WTF! Outside of the financial community, hardly anyone in this country has ever heard of this company. The Ant Group is about to smash all stock market records. It is expected to raise around $ 35 billion in capital when it opens to the public on November 5 on the Hong Kong and Shanghai stock exchanges. This is the largest IPO of all time.
However, the spectacular IPO is just the tip of the iceberg for Ant Group. While Tesla has rocked the auto industry, the Chinese ant could revolutionize the way we manage money. It is a kind of Asian variant of a woolly dairy sow from the financial industry.
Ant customers can do more than just process payments via an app. You can also use your smartphone to take out loans, invest in funds, take out health insurance or insure your car. And all this in real time, by briefly touching the screen a few times.
But first: The Ant Group was created in 2004 as a by-product of Alibaba. Its legendary founder Jack Ma was annoyed that Chinese banks weren’t really customer-friendly towards small ones. Mom is not someone who complains, she acts. “If the banks don’t change, we will change them,” he swore – and that’s exactly what he did.
He first separated Ant from Alibaba’s mother and started his own business. As a result, the ant quickly developed into a business that doesn’t just process payments. Today Ant is a financial institution that can compete with the largest in the world. The Economist is ecstatic when he enumerates the benefits:
«Ant is the best integrated financial platform in the world. Imagine the following combination: Apple Pay for offline payments, PayPal for online payments, Venmo for payment transfers, Mastercard for credit cards, JPMorgan Chase for consumer loans and iShares for investment, plus insurance brokerage, all on one mobile app. “
This combination is not only a technological marvel, it is also extremely attractive to customers. Ant had more than a billion active users last year and managed a cash flow of around $ 16 trillion. After the IPO, Ant will act on par with JPMorgan, currently the largest bank in the world.
Ant’s business model can be broken down into four areas: It started with digital payment transactions. It arises from the need to conduct Alibaba’s business efficiently and attentively to customers. In this area, Ant faced stiff competition from Tencent and its WeChat app. The margins are therefore extremely thin.
But thanks to payment transactions, Ant can collect and analyze huge amounts of data. His lending business benefits. The ant always knows exactly who is creditworthy and who is not, and hardly needs to take any chances. It acts as a broker who mediates loan requests to banks.
Meanwhile, Ant has also become something of a Chinese answer to BlackRock. It also has a foot in wealth management, which means: like iShares, it also manages funds for small savers. Around 170 companies currently offer around 6,000 financial products on the Ant investment platform.
Finally, Ant was recently involved in the insurance industry. It provides a platform on which you can take out life insurance or health insurance or insure your car. Along with wealth management, the insurance business is now responsible for a quarter of sales.
The benefits of this business model are obvious. Thanks to the huge amount of data collected in all areas, customers have no more secrets from Ant.
There is a positive and a negative side to this. On the one hand, this model allows for huge cost savings. At Ant, no one has to worry about high banking fees or excessive margins when changing money. On the other hand, not everyone might be happy that their monetary relationships are so transparent. For many people, money is more intimate than sex.
The IPO of the Chinese financial ant is more than an economic process. It shows once again how quickly China is getting rid of existing prejudices. Successful hedge fund manager Ray Dalio listed it in the “Financial Times” as follows:
“For as long as I can remember, I have been told that China will never make it. Communism doesn’t work. Authoritarianism doesn’t work. The Chinese are not creative. You have a big problem with debt and real estate speculation. Yet: they surprise us every day in an unusual way “.
The Ant Group has close links with the Communist Party. Beijing will therefore seek to politically exploit the company’s success on the stock exchange. Whether this will be successful remains to be seen. The total transparency that comes with the ant business model is far less popular in the West than in Asia – and the crackdown on Uighurs, Tibetans and Hong Kong protests will not change that in any way.
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