The dual listing of the operator of
China’s largest mobile payment app, Alipay, in both Shanghai and Hong Kong is
expected to be one of the biggest offerings ever. It may surpass the record set
by Saudi Aramco’s US$29.4 billion IPO last year. Analysts have estimated the
company could be offering up to US$35 billion.
Compared to 346 million active PayPal
accounts worldwide, Alipay today has 1.3 billion annual active users, mainly
from China. Over 300 million users are from India, Thailand, South Korea, the
Philippines, Bangladesh, Hong Kong, Malaysia, Indonesia and Pakistan. According
to iResearch, Alipay has a 54% share of the Chinese digital payments market (volume
of about $33 trillion) last year. Tencent on the other hand is the second
biggest player with 39% market share.
Ant Group however is not only about
digital payment. Unlike Western mobile wallets, Ant Group provides nearly all
aspects of financial services. The Economist describes the group as a
four-legged insect. Ant’s platform is like a combination of Apple Pay for
offline pay, PayPal for online pay, Venmo for transfers, Mastercard for credit
cards, JPMorgan Chase for consumer financing and iShares for investing, with an
insurance brokerage all in one mobile app.
Bernstein analyst Kevin Kwek sees
the payments component as a “hook product” for the company that may have
limited profit potential but helps the company bring in new users who can then
try out more lucrative services.
App-based
payments are commonplace in China, even for in-person transactions, and this is
perhaps the most well-known aspect of Ant’s business. But other areas of the
business are more interesting, Bernstein’s Kwek argued in a note to clients,
particularly the company’s credit business, in which Ant originates loans that
are almost entirely underwritten by financial partners, giving the company
useful loan insights without requiring it to take much balance-sheet
risk.
The credit business is
“maybe the gem” of Ant’s business, Kwek wrote. By his math, with a
“conservative” assumption that the company only made one loan to each of its
500 million loan customers over the past 12 months, Ant would have originated
16 loans per second.
thefinanser.com
What are the risks?
Ant Group tripled its
value in just three years. In order for the Group to sustain its growth, Ant
needs to continue to expand overseas. Those growth markets are likely to
include Southeast Asia, South Asia, Africa and the Middle East. Hence, the
U.S.’ restriction on Chinese technology firms is unlikely to hurt the Ant Group
in the short term.
Another risk is the
dependency of the Group on financial institutions to offer credit. Microlending
is the backbone of Ant’s profit. The IPO prospectus identifies the risk of Ant unable
to maintain healthy partnerships with financial institutions. How long will
these banks continue to trust Ant, as it hoards all customer data?
Reference:
1.
What
Ant Group’s
IPO says about the future of Finance,
The Economist, 10 Oct 2020
2.
Emily
Bary, Ant Group IPO: Five things to know about the Alibaba affiliate aiming for
the largest offering in history, www.marketwatch.com
3.
What’s
the real risk in Ant’s IPO? www.digfingroup.com
No comments:
Post a Comment