Ant Financial: Record Funding Round and Strategic Shift

Many rumours made the rounds, but Ant Financial –financial arm for the e-commerce giant Alibaba– eventually announced a $14 billion funding round. On this occasion, Ant Financial further comments on their international development and strategic shift towards the BtoB sector. Through this turn, they see themselves as a technological company.

The Chinese FinTech weighs roughly $150 billion, and is expected to head for an IPO in the coming months. With their payment solution, savings and credit services, Ant became a prevailing e-commerce player in China. So much so that local regulators sounded the alarm and expressed concerns about financial risks.

In light of increasing regulatory and competitive pressure, Ant Financial plans a strategic shift to build BtoB-oriented technological services for financial institutions. Reuters refers to some sources with knowledge of the matter, indicating that this company expects these services to account for 65% of their revenue in 5 years (compared to 34% today). Their payment activity, for its part, accounted for 54% of their revenue last year but could amount to 28% in 5 years.

This new funding round should also help this finance giant deal with underway regulatory changes and speed up the pace of their international development.

Comments – BtoBtoC strategic shift for Ant Financial

Chinese authorities are getting ready to introduce new rules for the FinTech market. These rules would impose that large-scale players should build up their reserve fund to guarantee their customers' deposits and that they should be granted banking licences from the Central Bank of China.

Under this regulatory pressure and considering a decrease in revenue expected to impact some industries (including payments), Ant Financial needs to make major changes to their positioning. This strategic operation shows how far these new regulations actually impact local companies, and explains why some trends have started to surface these past few months: including market consolidation via partnerships. Ant’s shift to a BtoB approach should help the group match the local government’s requirements for the financial sector, while still allowing them to grow and craft innovative services. They would then join the list of FinTech companies building white-label technological solutions for financial institutions. And, all in all, they should remain serious competition considering the amount of data they hold.