For the last 4 years, I have been telling my students in future studies about the amazing success of Ant Group, the stack of financial services built by Jack Ma on top of the phenomenal success of Alibaba. What is going on for years with Ant should act as a major warning sign for the future of the finance industry and particularly for large incumbent banks, that are often already in trouble with their retail networks.
(Source: Ant Group international website https://www.antgroup.com/ja )
Ant Financial started as a branch of Alibaba in 2014 and is now a spin-off of the Chinese e-commerce giant. Renamed Ant Group, it is now set to raise $34bn in the world's biggest IPO. More than Saudi Aramco last year, more than Alibaba itself in 2014 ($25bn raised on the New York Stock Exchange). But this time, the shares will be traded in Shanghai and Hong-Kong. Ant Group is selling 11% of its shares, which would price the company above $300bn. Such a valuation would make Ant Group larger than mega U.S. banks such as Citibank or Wells Fargo, comparable to Bank of America.
Ant Group offers people - mostly in China - a one-stop-shop for loans, investments, and many other financial and payment services (credit and debit cards, insurance...). Its most famous service is Alipay, which has an estimated 58% market share of online payments in China and more than 1 billion users.
The rise of Ant Group is significant for 3 major reasons:
- the largest IPO ever will happen in China, not on the U.S. stock market, at a time when the two superpowers have engaged in a commercial war. Another potential signal for a power shift from the U.S. to China?
- this is very emblematic of one of the trends that I developed in my talks and courses about the future: "large techs eating finance". All the large techs are now investing in finance: Apple and Samsung through mobile payments, Amazon is offering services to its merchants, Facebook is trying - with Libra - to offer new crypto payments. But none of these companies had been so far as Ant Group, except its closest competitor, We Chat Pay, owned by Tencent. WeChat Pay is better known in the West than Ant Group, but Ant Group offers a broader range of services. The threat to large incumbent banks in the future will probably not come from small disruptive Fintechs but from large techs coming into Finance, the "TechFins" who already know how to manage high volumes of data, millions of clients, and already have well-known brands whose reputation might not be the best, but not worst than the banks. Furthermore, they have a lot of cash;
- this leads us to our third reason why this is interesting, which is probably the regulatory gap between China and the U.S. Regulation in China and authorities support probably enabled the constitution of full stacks of services like the ones Alibaba and WeChat offer, from e-commerce to financial services. A Western equivalent would be a Facebook + Amazon + Uber + Apple Pay + a neo bank, all within the same group.
All this raises three interesting questions:
- how far could Ant Group now go? Can they conquer the world beyond China and Asia?
- which of the large Western tech - which means U.S. tech basically - will take the lead in the financial services and could rival with Ant Group on the world stage?
- will the incumbent banks sell their retail networks to the large TechFins and focus on their corporate business?
What do you think?