China state-backed companies plan to establish a personal credit-scoring firm to handle Ant Group‘s treasure trove of data as part of a regulatory revamp ordered after its botched November stock market listing, three sources said.
The new company could help revive Ant’s blockbuster initial public offering (IPO) which regulators put a stop to in November 2020, the people said.
Under the plan, Ant and Zhejiang Tourism Investment Group Co Ltd will each own 35% of the venture, while other state-backed partners include Hangzhou Finance and Investment Group and Zhejiang Electronic Port, one of the people said.
The only non-state investor will be Transfar Group, parent of logistics and financial services firm Transfar Zhilian Co Ltd, said the people with knowledge of the matter, who declined to be identified as the information was private. Transfar’s stake will total 7%, one of the people said.
Calls to Zhejiang Tourism seeking comment went unanswered. Ant and other shareholders did not respond to emailed requests for comment. The People’s Bank of China (PBOC) – China’s central bank, which is overseeing Ant’s restructuring – did not immediately respond to a faxed request for comment.
The aborted November IPO drew regulators’ attention to billionaire Jack Ma’s Ant and e-commerce affiliate Alibaba Group Holding Ltd. The result was a restructuring order for Ant, a record $2.75 billion fine for Alibaba for antitrust violations, and a near-three month disappearance of Ma from public view.
The plan would represent one of the most prominent outcomes of a government push for state-backed firms to exert more control and influence over fast-growing but previously lightly regulated new-economy businesses. It would loosen Ant’s grip on a treasure trove of data on more than 1 billion consumers, and give big state-owned actors a bigger say.
It follows the PBOC in April ordering Ant to become a more strictly regulated financial holding firm, break its “monopoly on information and strictly comply with the requirements of credit information business regulation.”
In June, Ant won operational approval for a consumer finance venture whose minority shareholders include state-owned firms. The venture puts Ant’s lucrative micro-lending businesses under tighter regulatory purview.
The proposed credit-scoring firm would bring Ant’s main business-data operations under one unit, also making regulatory oversight easier.
Under the framework being discussed for the new joint venture, shareholders will invest about 500 million yuan ($77.4 million) in the venture as registered capital, one person said.
They aim to establish what would be China’s third private credit-scoring firm as soon as October, two of the people said.
E-commerce and financial technology (fintech) firms such as Ant sit on a huge cache of consumer data that is the backbone of China’s internet where, in finance, companies’ offerings are as varied as loans and investment products sold via smartphones.
Big platforms such as Ant, which began as Alibaba’s payments arm, have for years been reluctant to share that data with credit-scoring firms run or backed by regulators.
The government responded with tighter rules for fintech firms that collect and use personal data in financial services.
In January, the central bank issued draft rules clarifying the scope of information and businesses included in credit-scoring regulation and urged credit-scoring firms to apply for licences and to not over-collect user data.
Ant, via super-app Alipay, collects data of over 1 billion users, many of whom are young, internet-savvy people without credit cards or sufficient bank credit records, as well as 80 million merchants, according to analysts and its IPO prospectus.
It runs Zhima Credit, one of China’s biggest private credit-scoring platforms, with proprietary algorithms to score people and small businesses based on their use of Ant-linked services.
The firm offers limited borrower information to about 100 banks, taking so-called technology service fees – typically 30% to 40% of interest on loans it facilitates, analysts estimated.
• Reuters and Jim Pollard