Financials Author: Skye Lan Editor: Luke Sheehan Oct 10, 2020 01:36 AM (GMT+8)

With its well-integrated business structure, the technology giant has built a moat in the Chinese market – and is going to expand abroad.

Image credit: EqualOcean

Ant Group's Future: Fuels From Inside and Outside [2/2]This is the second part of the series articles, please check out the previous part first.

Integrating the businesses into a closed loop

The way Ant Group differentiates the most from other players is in the well-rounded services and products that are linked to each other, forming a closed financial loop and therefore maintaining an extremely high user adhesiveness.

Tencent's WeChat Pay is always considered to be the largest competitor of Alipay, but the latter has advantages in the financial business as it covers almost all life scenarios and integrates all of them on the Alipay platform.

Backed by Alibaba, Alipay is embedded in Alibaba's e-commerce ecosystem, such as, the largest e-commerce website worldwide, which provides a tremendous user base for Alipay's payment business. All other third-party partners in different areas bring traffic for Alipay as well.

For Ant Group, payment is linked to everything. Ant Cash Now (Chinese: 借呗) and Ant CreditPay (Chinese: 花呗), two main credit products of Alipay, and Yu'E Bao (Chinese: 余额宝), the largest money market fund, can all be used for purchase both online and offline. Through, freight insurances are embedded in the orders. What is more, the payment services provided to B-side clients such as merchants, are always linked to the financing needs, which led to the credit services provided by MYbank. Zhima Credit (Chinese: 芝麻信用) that is embedded in the Alipay, similar to FICO sore in the US, is used to measure individuals' credit behavior. All the services provided on Alipay are tied to Zhima Credit, which will directly affect users' financial service fee, such as the interest rate for Ant CreditPay and Ant Cash Now, as well as the deposit amount in certain life services like hotels booking. Everything is well-integrated and forms a closed loop, which builds a strong barrier for Ant Group.

On the contrary, Tencent's financial services are provided through both WeChat Pay and QQ Pay with less integration, and the business has access to only third-party e-commerce websites without having its own large online mall to combine its payment services and credit business, which are provided by WeBank. The close loop provides a higher user cohesiveness for Alipay and shapes Ant Group's leading market position.


Ant Group not only explores the global users through the international version of Alipay that is basically what WeChat Pay and PayPal are doing, but also outputs technologies to globalize the local payment market. Since the globalization strategy launched in 2016, Ant Group has built nine local versions of Alipay, such as those for India, Pakistan, Thailand and Korea. Through acquisition or strategic investments, Ant Group has helped nine countries to build their digital payment infrastructure and linked them with the rest of the world.

Aligned with Alibaba's globalization strategy, Ant Group is aiming to build a payment network covers the entire world that is backed up by the Alibaba's e-commerce platforms worldwide, such as, Tmall international, AliExpress, LAZADA, and logistic company like Daraz, as well as the global travel platform Fliggy. The Alibaba ecosystem is building a digitalized infrastructure for the world.

New growth driver coming from the industries

The macroeconomics drives the entire industry to grow.

Opportunities in the payment market from both in and outbound

As digital payment is in its relatively mature stage in China right now with 86% of the offline shopping being paid through mobile methods at the end of 2019 according to PwC, payment agencies are competing on more advanced paying methods, such as face and voice recognition techniques. There is always a direction for the payment market to transform and therefore provide room for companies like Ant Group, which drives it to a finer operation.

What is more, continuing globalization increases international trade among countries, especially China without doubts. The cross-border export and import of China in the retail e-commerce field are expected to continue to grow at high rates, which drives the digital payments market.

Unbanked clients provide a large market

According to the State Administration for Market Regulation, market entities in China increased by 12% to 123 million at the end of 2019, with 67% of which, around 82.61 million, are individually owned businesses. SMBs indeed constitute a large portion of China's economy. However, they still lack attention from the state, which often left them in a tricky situation, with difficulties in financing – therefore, they had an average lifespan of only three years. According to the World Bank, CNY 17.4 trillion in financing needs were filled in China for small and micro-businesses in 2018, accounting for over 57% of total demand, among which a majority went to small and medium businesses (SMB) with 1% left for micro-businesses. Also, two-fifths of the needs were dealt with in the private sector.

MYbank, as the major partner of Ant Group, is catching this trend, with its focus on business lending, with small-to-medium businesses (SMB) clients counting over 20.87 million in 2019, significantly surpassing its competitor, WeBank, at 0.3 million. Also, based on the forecast of Oliver Wyman, the credit balance for SMBs with single loan amount less than CNY 500,000 will grow with a CAGR of 27.2%, from six trillion in 2019 to 26 trillion in 2025, representing a large expanding room for credit services for the entire market as well as the Ant Group.

Furthermore, as the low penetration rate of credit cards among the adult population in China, unbanked individuals are becoming a large market for the credit lending business. Considering the limitations for applying for credit cards in China, such as the jobs and salaries, online consumer financing platforms are becoming accessible, especially for young people who are still at college or lack sufficient income. Also, as the consumer financing balance in China still accounts for a small amount of total savings when compared to the US, people will have more credit spending in the future, which provides the development room for companies like Ant Group.

Financial institutions increasing investment in fintech

As a Technology as a Service (TaaS) company, Ant Group's to-B business in the fintech area is likely to be driven by the increasing expenditure from financial institutions (FIs). The main sectors that Ant Group provides support to – areas like consumer finance, insurance, and wealth management – have been increasingly funded.

For example, in 2019, CITIC Bank increased investment in technology by 35.8% compared to 2018; the figure for Ping An Bank was 36.8%, for Bank of Communication 22.94%, Industrial Bank 24.66% and Bank of China 15.15%.

After decades of development, Ant Group has formed its unique business model with a closed loop in financial business, and built robust barriers in technical capacity. In this technology-driven era, we believe the company can go further along with the developing industries.