China’s regulators are trying to get Jack Ma to do something the beleaguered billionaire has long resisted: share the amount of consumer credit data his financial technology has amassed.
Mr. Mom has little room to negotiate after the business empire he built over decades ended up in the crosshairs of regulators and even President Xi Jinping, and this partly reflects Beijing’s concern that the flamboyant entrepreneur was too focused on his business happiness rather than the state’s purpose of controlling financial risks.
What regulators consider to be the unfair competitive advantage that the company has over small lenders or even large banks through its personal data used from the payment and lifestyle is central to the oppression of Ant Group Co., in which Mr. Mom is the controlling shareholder. Alipay app.
The app, used by more than a billion people, contains great information about consumers’ spending habits, lending behavior, and the history of account and loan payments.
Equipped with the information, Ant loans arose to half a billion people and he got about 100 commercial banks to provide the majority of the financing. In these arrangements, banks take the greatest risk of borrowers’ failure, while Ant holds the profit as the middleman.
Employees work at Ant Group in Hangzhou, China in October.
Photo:
aly song / Reuters
Now authorities want to overthrow the business model, which is profitable for the company but which poses potential dangers to the country’s financial system.
Not only are the authorities set up to regulate Ant’s lending activities like a bank, which will result in him providing more of his own funds when he takes out loans; according to the officials and government advisers with knowledge of the regulatory affairs, they also plan to break what they consider to be the monopoly of data.
Ant declined to comment.
One plan under consideration would require Ant to enter its data into a nationwide credit reporting system run by the central bank, the People’s Bank of China, say people familiar with the matter. Another option would be for Ant to share such information with a credit rating agency that is effectively controlled by the central bank.
Despite the fact that Ant was a shareholder in the credit rating company, along with seven other big data-driven Chinese companies, he did not hand over his details, people say.
“The crux of the issue here is the way to regulate data monopolies,” said an adviser to the antitrust committee of the Chinese state government, the largest governing body.
In the US, lawmakers have also made efforts to curb Big Tech, arguing that companies like Facebook Inc.
and Google used large amounts of data to outperform competitors. The tech giants all denied wrongdoing.
Some analysts from the Chinese financial technology sector agree that it is in the public interest for companies like Ant to share consumer credit data. However, it is unclear whether regulators will require access to its entire database, including its own information that Ant uses to analyze the creditworthiness of its customers.
A few days before Chinese fintech giant Ant Group was to be published in the world’s largest listing, regulators suspended plans. WSJ’s Quentin Webb explains the sudden turn of events and what the IPO suspension means for Ant’s future. Photo: Aly Song / Reuters (Originally published on November 5, 2020)
“It’s a good thing to make credit history and scores more public,” wrote Martin Chorzempa, a research fellow at the Peterson Institute for International Economics, who is writing a book on the fintech sector in China.“It can help make loans more competitive and prevent overdrafts.”
For years, China’s financial regulators, led by the central bank, have been striving to set up a credit rating system similar to FICO scores in the US, created by Fair Isaac. Corp.
, as a way to make it easier for borrowers across China to assess credit risks and expand access to finance for businesses and individuals. The effort is part of a broader digital governance initiative aimed at leveraging data and technology to achieve greater social and economic control.
Mr. Mom, perhaps the Chinese entrepreneur who has been most identified with innovation in recent decades, has helped the government in various ways over the years. Alibaba Group Holding Ltd., the e-commerce giant he co-founded with the founder in 1999, used his data sources to help authorities track down criminal suspects and silence disagreements. Ant’s Alipay payment program includes contact tracing features to help the government curb the coronavirus pandemic.
According to officials and government advisers familiar with the matter, Mr. Ma has been resisting for the past few years to make regulatory efforts to make the personal credit data that Ant owns more available.
In 2015, Ant launched its own credit rating system, called Zhima Credit, which awarded ratings to many individuals and small businesses that did not compile credit histories elsewhere.
Three years later, the People’s Bank of China launched a personal credit reporting company called Baihang Credit and invited Ma’s Ant, Tencent Holdings. Ltd.
, which owns the popular WeChat messaging app and its associated mobile payment network, and six other businesses that are Baihang Credit’s minority shareholders. The controlling owner is the National Internet Finance Association which is supervised by the central bank. The idea was to get Ant and others to share their customer credit data, which would then be available to financial institutions across the country.
However, the plan failed all but. Ant refuses to contribute its own data to maintain its competitiveness, say officials and advisers. Meanwhile, Zhima Credit’s ambitions have been scaled down, and the Ant Unit is now a loyalty program that gives individuals with high creditworthiness fringe benefits, such as deposit exemptions when renting cell phone chargers, bicycles and cars.
Mr. Mom has fallen into a regular storm over the past few months. A public speech he gave at the end of October, in which he outlined President Xi’s signing campaign to combat financial risks as well as financial regulators, angered the leadership and Mr. Xi urged to recall a much-anticipated share sale by Ant. , according to Chinese officials with knowledge of the matter, and advises regulators to investigate the risks its business poses.
Since then, regulators have been using the control of Mr. Mother and his empire as part of a larger effort to strengthen oversight of the country’s increasingly influential technological sphere.
In a private meeting with regulators in early November, Mr. Ma herself also offered to let the government ‘take any parts that Ant has, as long as the country needs them’, according to people with knowledge of the matter. At the end of December, the central bank drew up a roadmap for Ant to restructure its business, which, among other things, required the company to be fully licensed to run its personal credit business.
In a statement issued by the People’s Bank of China, Deputy Governor Pan Gongsheng also widely criticized the company for its “defiance of regulatory demands”.
Mr. Mom has not appeared in public since his speech in October. Ant has scaled down parts of its operations over the past few weeks, reducing credit limits for some individual lenders and removing products that have rejected online deposits that financial regulators have rejected.
—Xie Yu contributed to this article.
Write to Lingling Wei at [email protected]
Copyright © 2020 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8