Focus on lending

The 16-years old Ant Group is famous for its dominant e-wallet Alipay, but it has become less important to the company due to competition and it has turned to lending.

Ant launched Alipay in 2009, four years after it was born as an escrow of Alibaba's online marketplace platform Taobao to build trust between buyers and sellers.

Alipay's total payment volumes reached 118 trillion yuan (HK$133.56 trillion) in the year ended June in the mainland - that's eight times China's 2019 GDP, according to its prospectus. But its market share dropped to 55.4 percent from around 75 percent.

The segment only contributed 35.9 percent of total revenue to Ant in the first half this year, down from over half before 2018.

Instead, Ant turns the customer lending business into the biggest revenue driver, accounting for 39.4 percent in the first six months. For the year ended June, Ant gave loans to around 500 million users, mainly young consumers lack a credit card or insufficient credit limits, through two mini-programs: Huabei, which is like a virtual credit card, and Jiebei, which provides short-term microloans. It has also made loans to 20 million small businesses through digital bank MyBank.

But Ant does not use its own balance sheet or provide guarantees. As of June 30, its total consumer credit balance reached 1.73 trillion yuan, but 98 percent of which was underwritten by securitized, or around 100 partner financial institutions, from major national state-owned banks to rural commercial banks.

That came after Ant repositioned itself from a strong competitor to a technology provider to traditional banks.

In 2013, Ant launched Yu'ebao, a money market fund allowing Taobao consumers to park spare cash to generate returns. Offering annualized returns as high as nearly 7 percent with a minimum investment of 1 yuan, Yu'ebao had become the world's largest money market fund, whose asset under management reached a record 1.69 trillion yuan in March 2018.

That made it a threat to traditional banks, which only provided 0.36 percent interest rate for deposits at that time. And pressured by the central bank, Yu'ebao has started to lower individual investment cap in phases with yields sharply declining, its AUM has fallen to 1.2 trillion yuan at end-June, shrinking by around 29 percent from the peak.

Ant now is working with around 170 asset managers to provide financial products, which has become the largest online investment services platform with AUM of 4.1 trillion yuan as of June 30. The so-called InvestmentTech business contributed 15.6 percent of total revenue.

The company tapped into the insurance market last year by launching Xianghubao, where it generated 52 billion yuan insurance premiums and contributions during the 12 months ended June 30 by offering insurance products from 90 insurers in China. The segment's first-half revenue was 6.1 billion yuan, accounting for 8.4 percent of total revenue.

In 2011, Ant, formerly known as Ant Financial, was spun off from Alibaba. But their closer ties are unchanged. Alibaba is Ant Group's largest shareholder with a 33-percent stake.

Its founder Jack Ma Yun, remains the ultimate controller of Ant, although the super unicorn does not adopt a dual-class structure as the market formerly speculated.

The tycoon holds 50.52 percent of voting rights in Ant, through entities namely Hangzhou Junhan and Hangzhou Junao, while he has pledged to donate 611 million shares to charitable organizations.