A Little Ant vs Giant Banks (Part I)

Last year, Alipay generated about $38.3 billion of sales in a single day sale over its Singles Day, an anti-Valentine’s Day holiday celebrating single people that is popular in many Asian countries. But there are so much more to just online payment processing, Ant Financial provides investment products, loans, online banking, and wealth management services to small-and-medium enterprises (SMEs), Chinese small investors, and the growing population of e-consumers. In June 2017, Ant Financial Services announced that it would allow third-party financial institutions to set up virtual shops through an indigenous app, as Amazon had done when it introduced its Marketplace (Galloway, 2017). More than a business development strategy, this announcement indicates that corporate convergence has occurred within Alibaba, while also incorporating other smaller digital platforms. Now this "little" Ant is looking to raise a record-breaking 30 billion dollars for its IPO, which is expected to happen by October 2020.

Ant Group is the fintech to beat all fintech, and the success of its IPO will be determined by how the market perceives its tech relative to its fin. The company is the ultimate mashup between Stripe, PayPal, Apple Pay, Venmo, FICO, and any of the multiple fintech companies in the U.S. that offer lending, savings, and insurance products. While the stocks of tech companies have risen strongly over the past few months with the Nasdaq up roughly 25% above where it was in February, the stocks of financial companies have languished. Meanwhile, with an estimated 200 billion USD, Ant Group is worth more than most global banks. 

In China, Ant Financial has transitioned itself from a ‘super-payment portal’ to an ‘open-end financial platform’. However, China’s $7.6 trillion online payments market is long enough for this Ant. Outside China, the ‘super-payment portal’ is still in an embryonic stage. It is foreseeable, Ant Group will continue to expand internationally in the fields of e-commerce, offline retail, and travel sharing. 

Some of My Key Takeaway 

1. Impressive profits and market demand.

The company booked a net profit of RMB 21.9 billion in the first half, outstripping its RMB 18.1 net profit for all of 2019, according to the prospectus. One billion Alipay users and big profit margins, need I say more?

2. All elements are in place for scalability in a completed ecosystem. 

The Alibaba and Ant Group founder helms a limited liability partnership, which controls two other partnerships that are Ant Group’s biggest shareholders. Alipay can you used on all social platforms and both offline and online. Your money basically never has to leave Ant's ecosystem. 

3. There is a massive borderless financial ecosystem developing beyond China's borders. 

The company singled out its cross-border payments business as exposed to such actions, adding that cross-border payments will be a key area of investment for Ant Group in the future. 

4. Post- COVID Growth and 

Contactless payment with facial recognition. 

5. Regulation Risk!!!

I will cover more about systematic volatility, regulation, and political risk in Part Two! Stay tuned. 

 

 

Check out this pdf, If you are interested in learning more about the business and operation model of Ant Financial. I will also share more financial analysis for part 2. 

 

inside-ant-financials-nest.pdf5.11 MB