"Ant Group Co. has started making it clear to customers if they are borrowing from outside lenders or from the company itself, as Jack Ma's financial-technology giant continues to fall in line with Chinese regulations.
Before its wings were clipped by Beijing, Ant, via its payment and lifestyle app Alipay, offered consumer-credit services that were widely popular among Chinese consumers and small businesses. The products later became one of the key reasons for Chinese regulators to scuttle its blockbuster initial public offering, just two days before the scheduled listing in November last year.
Ant, which is 33% owned by Alibaba Group Holding Ltd., has since been forced to revamp its businesses according to directions laid out by regulators including the People's Bank of China. As part of the overhaul, Ant set up a new consumer-finance company with several other companies in June, and started to fold the credit business into the new entity.
Ant offers Huabei, which means "just spend" in Mandarin, a virtual credit card-like service, and short-term unsecured loans under the banner of Jiebei, which means "just borrow." Together the two products were used by about half a billion people in China, and accounted for nearly a fifth of the country's outstanding short-term consumer debt as of June last year, the latest data available.
Ant funded only 2% of the 1.73 trillion yuan of loans, the equivalent of $271 billion, itself, with the rest financed by banks, trust companies and asset-backed securities as of June 2020.
Earlier this month, Ant started to differentiate Huabei and Jiebei products based on the source of funding, as required under regulations governing Ant's new consumer-credit company.
Only loans funded wholly or partially by Ant will continue to bear the brand names of Huabei and Jiebei. Consumer-credit services financed by other financial institutions will be called Xinyonggou, or "buy with credit." Similarly, consumer loans funded by other financial institutions will be called Xinyongdai, or "credit loan."
Ant said in a letter to users that "the brand differentiation will grow to cover more users" and recommended users to prioritize Xinyonggou over Huabei because the former has a larger credit line." [1]
Chinese regulators believe that distribution by Ant of other people's money on loans could lead to an avalanche of excessive risk-bearing loans, undermining the stability of the entire Chinese economy. Therefore, Ant is now performing these challenging dance movements. Lithuanian regulators could be well advised to learn from this.
1. Ant Group Rebrands Credit Offerings
Yang, Jing. Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 26 Nov 2021: B.4.
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