REX: Ant Financial Becomes 2nd Largest Lender in China

Despite a tougher regulatory environment for securitising its loans, Ant Financial’s consumer lending activity has been growing strong, reaching 600 billion yuan (over 77 billion euros) according to Bloomberg citing sources familiar with the matter.

Over the past 18 months, the volume of consumer lending issued by Alibaba’s financial subsidiary increased two-fold. This considerable growth has mostly been driven by their Huabei and Jiebei units, whose outstanding credit volume doubled year-over-year.

Ant Financial came to become the second-biggest lender in China in terms of outstanding credit. On average, people borrow 700 yuans (90 euros) per month from Huabei, and 3 000 yuans (383 euros) per month from Jiebei (unit focusing on short-term consumer loans).

In a rather unfavourable economic context, the government also reduced quotas for new Asset-Backed Securities (ABS). The volume of repackaged debt sold on to investors by Ant Financial decreased over the past months: 10.7 billion yuan of ABS this year, vs 31 billion yuan in Q1 2017 this a total of 243 billion yuan of ABS in 2017. This pressure could end up impacting the company’s balance sheet.

Comments – Ant Financial starts a revolution on the Chinese financial sector

Considering Alipay’s huge popularity, and its +600 million user base, Alibaba’s financial arm soon built a full-fledged ecosystem for financial services. Besides consumer credit offers, Ant Financial developed investment products, micro-insurance services, and assessment tools for qualifying the credit risk.

Alibaba entered the credit market, and took advantage of increasing needs expressed by the Chinese middle class. By way of standing out, the group relies on a digital approach and especially crafted algorithms. In 2017, they had more than 100 million users for their lending services, and 257 million users for their credit scoring tool. Ant Financial became a key player on the Chinese credit sector. This hegemonic position also fuels Alibaba’s sales. Their financial arm secured roughly 100 billion dollars in investments already and is getting ready for its stock market listing. They lead the overall Asian market, and aim to reach out even further. For instance, the group took a 45% stake in Telenor Microfinance Bank, so they can address 100 million unbanked customers in Pakistan. These strategic moves are paving their way toward international expansion.