"If the banks won't change, we will change them."

When Jack Ma made this remark for the first time in 2008, Alipay had a history of less than four years and its user numbers had just exceeded 100 million.

10 years later, in June 2018, Alipay's parent company Ant Financial completed its $14 billion Series C financing at a valuation of more than $150 billion, the world's largest single financing to date.

Following the financing, the valuation of Ant Financial surpassed Baidu, next only to Alibaba and Tencent in China. Globally, among listed technology companies, only old-brand giants like Netflix and NVIDIA can rival Ant Financial. While among the unlisted technology unicorns, Ant Financial is firmly in top spot.

Barclays Bank has predicted that in 2019 Ant Financial will achieve profit of US$5.53 billion. Multiplied by a relatively conservative P/E ratio of 28, the valuation result is US$155 billion.

A P/E ratio of 28 far surpasses the average P/E ratio level of financial institutions. While the capital market grants a high valuation to Ant Financial, it is more inclined to define the giant as a technology or internet company, rather than a financial institute.

Ant Financial, the 'giant ant'

From the perspective of an internet product, this 'giant ant' has indeed reached a development peak. Cheng Li, CTO of Ant Financial revealed in mid-2018 that Alipay has nine local digital wallets around the world serving over 870 million people.

Years ago, the introduction of Yu'E Bao by Alipay marked the coming of internet finance to China. Yu'E Bao, P2P, mobile payment and smart credit gradually entered public view and profoundly influenced modern life.

The TMTPOST team once reported on the recent years of internet finance in China as a "Great Rebellion". Today the "rebellion" is acquiesced to no more. After all the ups and downs, the self-support financial services of the internet giants are finally falling back into the grasp of traditional financial institutions.

The "rebellion" started to weaken at the end of 2017. Regulators in China began reorganizing cash and internet loans by requiring off-balance-sheet assets, such as asset-backed securities (ABS) of microcredit companies, be included on balance sheets and uniformly regulated. It indicates that the frenzied days that saw microcredit firms issue nearly 350 billion yuan in high-leverage ABS in 2017 have come to an end.

In response, at the end of 2017, Ant Financial significantly increased funding for its two microcredit firms, and further introduced two services, 'Ant Credit Pay' and 'Ant Cash Now', to financial institutions. In this way, it takes money out of the banks' pockets to encourage people's use of credit.

Besides consumer financing restrictions, Ant Financial has also faced obstacles in other core financial businesses in recent years.

In the field of wealth management, the landmark Yu'E Bao has long passed its heyday. The redemption quota of 'T+0' inside one single day was prohibited by regulation, and fundraising behavior of non-bank institutions is no longer allowed. Under various pressures, the individual investment quota in Yu'E Bao fell time and again.

Ant Wealth is the main financial management platform of Ant Financial. It engages mainly in fund-based sales, though banks still dominate the field. In 2017, operational revenue of Ant Fund reached 746 million yuan, net profit 5.5536 million yuan. Compared with 2016, operational revenue in 2017 increased by 176% while net profit shrank 60%.

In the credit business field, in May 2018 the People's Bank of China took the lead in establishing Baihang Credit as the only market-oriented personal credit investigation agency with personal credit investigation license in China. An immediate result is that all internet credit investigation agencies, including 'Zhima Credit' under Ant Financial, an alternative to traditional credit-scoring mechanism such as Fico in the US, will be prohibited from engaging in the personal credit investigation business.

Clearly, all previous innovations and "rebellions" in internet finance across all fields are now facing the prospect of full standardization.

"Had we anticipated the situation today, we would not have put a 'Jin' (a Chinese character meaning finance) in the name of Ant Financial (Ma Yi Jin Fu)." In June 2018, Chen Liang, vice president of Ant Financial, publicly claimed that the key word in 'Ma Yi Jin Fu' was not, in fact, 'Jin', but 'Fu' (a Chinese character meaning service). However, it is clearly 'Jin' that resonates most in the market.

Throughout 2018, the 'opening-up' of Ant Financial to the banking world progressed rapidly. Take May for instance - Ant Financial cooperated successively with Huaxia Bank, Everbright Bank and Shanghai Pudong Development Bank to work on fields such as AI, supply chain cooperation, biometrics and data risk management. On the other hand, Yu'E Bao started collaborating with several fund companies, while Ant Credit Pay established the necessary connections with banks and other financial institutions.

Reuters once quoted people in the know to say that Ant Financial needed to accelerate its transformation due to the increasing regulatory pressure imposed on its core financial businesses including payment, microcredit, credit rating and financial management; in the future, its business focus will shift away from payments and consumer finance to technical service, since "banking regulators monitor the company's financial services at its headquarters in Hangzhou almost every day."

Ant Financial is indeed flexing its technical genes – according to official information from Ant Financial, by Dec. 2017, technical staff accounted for 61% of its employees. Jiang Guofei, vice president of Ant Financial, claimed in May 2018 that "Ant Financial's number of patents in the field of blockchain ranks first in the world."

Monetary investment in primary markets is a better reflection of a company's change at the macro level, and its true strategy. Ant Financial is continuing to build its investment profile, with several investments in consumer fields, such as lifestyle (Chinese food-delivery platform Ele.me) and travel (bike-sharing firm ofo).

Consumer spending is closely bound up with mobile payment. For Ant Financial, mobile payment, rather than social intercourse, is the unshakable basis of its entire business model. It is Ant Financial's entry into almost every business.

This trait becomes even more evident when ants go out to sea. In its foreign investments, wallet payment projects account for the majority. Foreign digital wallets significantly influenced by Ant Financial include India's Paytm, South Korea's Kakao Pay, Ascend Money in Thailand as well as its sub-company True Money, DANA in Indonesia, GCash in the Philippines, TNG in Malaysia, Hong Kong's Alipay HK and TMB in Pakistan.

Paytm in India

Paytm, Alibaba's holding subsidiary in India, has already become the country's No. 1 mobile payment company, while further scoping out of consumer spending fields has begun. At the beginning of 2018, Zomato Media Pvt, an Indian version of Ele.me, raised $200 million from Ant Financial.

In China, Ant Financial has transitioned itself from a 'super-payment portal' to an 'open-end financial platform'. Yet outside China, the 'super-payment portal' is still in an embryonic stage. It is foreseeable, though, that in this battle for new continents, giants Ant Financial and WeChat Pay will continue to battle it out in the fields of e-commerce, offline retail and travel sharing.

In contrast, the 'open-end financial platform' has just budded overseas. Former president of Ant Financial Peng Lei, in her role as CEO (she resigned Dec. 2018) of Lazada, an e-commerce firm in Southeast Asia, on Apr. 18th, 2018 introduced Lazada's 'Cardless Installment' service, allowing qualified clients to buy its products and pay in installments. Introduction of this quasi-Ant Credit Pay service was the first action taken by Peng Lei after assuming office.

10 years ago, even Jack Ma, who announced plans to "overturn the banks", would unlikely have foreseen the current size of Alipay. And now Tian Guoli, the president of CCB, one of China's Big Four banks, reveals his true feelings: "In recent years, traditional banks have constantly suffered under the Fintech companies. Now, we are confident to say that traditional banks are about to 'overturn' them."

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This article was edited by @Dido Pang . The original Chinese version was written by @Cai Pengcheng. 

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