While Alibaba remains the largest IPO ever, Ant Financial Services Group—a spin-off from Alibaba Group—is emerging as a top pre-IPO technology company. Ant Financial has an estimated business value of $75 billion and has been recently taken the top slot among leading global fintech innovators from around the world for 2016.
Here’s why Ant Financial is one of the most anticipated IPOs.
Alipay was established in 2004 by Alibaba Group to be the central element of its internet finance ecosystem. However, to comply with regulations issued in June 2010 by the People’s Bank of China (PBOC), Alipay was spun-off from Alibaba in 2011, although long-term commercial operations continue.
Ever since, Alipay has been run as a wholly-owned subsidiary of Small and Micro Financial Services Company, which was eventually restructured and renamed Ant Financial Services Group in October 2014. In addition to Alipay, Ant Financial Services Group operates Ant Fortune, Zhima Credit, MYbank and Ant Financial Cloud. Jack Ma, Alibaba’s founder, has a major stake in these ventures.
Ant Financial’s shareholding pattern reflects a 23.6% stake with domestic Chinese investors while 76.4% is held under Alibaba partnership with management and employees, including cross grants to Alibaba Group. In event of an IPO, Alibaba Group has a right to a 33% equity stake subject to regulatory approval.
Ant Financial is powered by Alipay, the world’s leading third-party payment platform with over 450 million active users. Alipay captures 55% of the fast-growing third-party mobile payments market in China. With an “aim to have at least one million merchants outside the Chinese Mainland to accept Alipay worldwide in three years,” and grow its associated businesses, Ant Financial is actively working on organic and inorganic strategies.
First Data Corporation (FDC), for instance, will become the first company to implement Alipay at the point-of-sale for American businesses in a scalable manner. The partnership is an extension of its collaboration forged in 2016, under which Alipay mobile payment solutions were accepted at select luxury and specialty retail locations across California and New York. Another tie-up, with Verifone, which has over 29 million payment devices and terminals worldwide, will enable retailers in North America and Europe to accept Alipay through Verifone e355 mPOS solution.
As of December 2016, Alipay was supported in 70 countries and regions, while it works with over 200 overseas financial institutions and payment solution providers, and presently supports 18 currencies.
Through its overseas alliances, Alipay is looking to grab a bite out of the spending done by Chinese outbound tourists while facilitating purchases by overseas customers on Chinese e-commerce sites. Visits by these outbound tourists are forecast to reach 150 million in 2020, according to the China National Tourism Administration.
The World Tourism Organization (UNWTO) highlights that tourists from China spent $261 billion during outbound travels in 2016, an increase of 12% from 2015. Its growing middle class and changing preferences will continue to fuel its outbound tourism and spending.
A reflection of rising spending and positive impact of Alipay’s strategy is evident from the figures reported during the Golden Week holiday in 2016, when “the transaction volume processed by Alipay at overseas destinations increased by four times compared to the same period last year.”
Beyond travelers, Ant Financials seeks to gain from the remittance market via its agreement to acquire MoneyGram (MGI)—a leading global money transfer and payment services company. During 2016, global remittances amounted to $575 billion as per the World Bank data.
While promoting digital financial inclusion and green finance, Ant Financial aims to provide financial services to over two billion users in ten years. To achieve that, it is building an open ecosystem with its global partners; India’s Paytm and Thailand’s Ascend Money are two important partnerships in this direction. In 2016, Ant Financial become the first Fintech company to join UN Environment Programme Finance Initiative’s network.
If that wasn’t enough, Ant is also investing in and applying advanced technology such as big data, artificial intelligence, facial recognition, blockchain, and intelligent risk control to solidify its core products. Overall, Ant Financial is steadily moving towards becoming a global company.
Reports suggest that Ant Financial plans to go public by end of 2017, and is anticipated to list shares on Chinese as well as overseas stock exchanges, although there aren’t any further details available at this time.