The latest FinTech company to come out of China is set for a record I.P.O offering as it continues to attract billions of dollars in total funds raised. Ant Group, co-founded by billionaire Jack Ma, is set to raise more than $34 billion as it eagerly awaits its listing on the Shanghai and Hong Kong Stock Exchanges. At the time of writing, Ant Group is set for a valuation of over $300 billion. This valuation will inevitably catapult it to the upper echelons of the world’s most valuable financial technology companies.
What is Ant Group?
Prior to its prominent rise, Ant Group was an affiliate company to the much-lauded Alibaba. It’s primary objective was to act as an online escrow service, facilitating payments within the ever-growing retail giant. Its central positioning in the Alibaba Group did not sit well with investors. This was until Jack Ma revolutionised Ant and incorporated into the fold, without compromising Alibaba profits.
The actual function of Ant is to operate Alipay, which is a highly popular payments app. Although Alipay continues to grow in prominence throughout China, and much of Asia, it is nearly unheard of in the western world. However, up until now this hasn’t been a concern. The app has close to one billion users and has a reputation for being extremely efficient in facilitating transactions. It’s been noted that Alipay completes more annual payments than global payment companies Mastercard and Visa. To put this in perspective, Ant’s internal system has the ability to process almost half a million payments every second. In comparison, Visa states that it can process 65,000 per second at peak times. The clear difference between these two processing systems has allowed Ant Group to capitalize on increased consumer demand throughout China.
Difficulties to operational expansion
As outlined above, and what is clear from its overall valuation, is that Ant Group enjoys much success at home. This hasn’t necessarily been replicated overseas. Alipay does offer services in foreign countries – such as the U.S. and throughout Europe. But, for the most part, it seems to act as a payment option to Chinese residents who find themselves outside of China.
Ant Group has earmarked certain digital payment solutions for investment purposes. In some cases, this has resulted in it gaining a stake in these e-wallets. This allows for the facilitation of cross-border financial services. Ultimately though, it must be noted that the bulk of its profits originate in China.
A major issue facing the ambitions of Ant Group is the current breakdown in U.S.-China relations. As political rhetoric becomes less harmonious, Ant Group faces an uphill battle in expanding operations outside of Asia. This leads to certain concerns over the upcoming public offering, and whether their overall valuation is justified. Although China remains a colossal market, it remains to be seen how they’ll fare if expansionary efforts are thwarted.