China Tells Ant to Refocus on Payments Business – The Wall Street Journal

Regulators in China directed Ant, which owns online payments platform Alipay, to safeguard personal data in its credit business and take other steps.

Photo: Qilai Shen/Bloomberg News

China’s financial regulators told Ant Group Co., the financial-technology giant controlled by billionaire Jack Ma, to switch its focus back to its mainstay payments business and rectify problems in faster-growing areas such as personal lending, insurance and wealth management.

The order, outlined Sunday by China’s central bank, represents the latest step by Beijing to rein in its largest technology companies, and it could signal Ant will have difficulty making further inroads into lucrative areas it had previously targeted for growth.

Authorities also criticized Ant for its behavior toward competitors and consumers, saying it “despised” complying with regulations. They accused Ant of engaging in regulatory arbitrage and having problematic corporate governance, without providing examples.

The statement from the People’s Bank of China followed a Saturday meeting between the PBOC, Ant, and China’s securities, banking and foreign-exchange regulators. It was written as a Q&A with the bank’s vice governor, Pan Gongsheng.

In the meeting, regulators made several other demands of Ant, the central bank said. These included telling it to safeguard personal data in its credit business, to improve corporate governance, and to act prudently in its financial-services businesses.

Ant said it appreciated the guidance and would comply with the regulatory requirements. The company said it would develop a timetable and a plan of action.

Beijing has gotten tougher on fintech platforms in recent months. Rules introduced in September require Ant and other conglomerates to set up financial holding companies, effectively compelling them to put up substantial capital to back finance businesses they own in areas such as payments and lending.  Regulators reiterated this demand to Ant on Saturday.

Separate draft rules would also force companies like Ant to cough up more of their own capital to support online-lending operations.

Last month, Beijing pulled the plug on Ant’s planned initial public offering in Hong Kong and Shanghai. The blockbuster IPO had been set to raise at least $34 billion—but Chinese President Xi Jinping personally decided to halt the deal after Mr. Ma infuriated government leaders with an outspoken speech, The Wall Street Journal has reported.

Xiaoxi Zhang, an analyst at Gavekal Dragonomics, said for now there was no order to break up Ant, buying the company time to get its house in order. “It looks like the authorities mainly want Ant to dial back its business focus back to payment, and put a check on other financial services like online lending,” Ms. Zhang said.

Ant’s origins lie in facilitating online transactions for affiliate company Alibaba Group Holding Ltd. BABA -13.34% However, digital lending has in recent years become Ant’s biggest growth engine. The business’s fast expansion helped underpin the company’s recent stratospheric valuation—but also aroused concern among regulators.

In the first half of this year, Ant’s payments arm accounted for 36% of company revenues, down from 52% in 2018, according to an IPO prospectus. Its lending business, CreditTech, has quickly grown to be Ant’s single biggest source of revenue.

Ant has already moved to dial back risk in lending. On Wednesday, Ant said its Huabei consumer-lending platform had cut credit limits for some younger borrowers to promote “more rational spending habits.”

Alibaba, the e-commerce giant Mr. Ma co-founded, has also come under pressure recently. Its American depositary receipts crashed 13% Thursday after China launched an antitrust investigation into the company.

Write to Xie Yu at [email protected]

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