The Chinese regulators are trying to get Jack Ma to do something the beleaguered billionaire has long resisted: share the wealth of consumer credit data amassed by his financial technology giant.
Ma has little room to negotiate after the business empire he has built over decades has landed in the crosshairs of regulators and even President Xi Jinping, partly due to Beijing’s concern that the flamboyant entrepreneur has been too focused on are business fortunes rather than on that of the state’s purpose to control financial risk.
Central to the crackdown on Ant Group Co., in which Mr. Ma is the controlling shareholder, is what regulators consider to be the unfair competitive advantage the company has over small lenders or even large banks through a slew of personal data being utilized by his payment and lifestyle. app Alipay.
The app, used by more than a billion people, has extensive data on consumer spending habits, borrowing habits and the history of bills and loans.
Equipped with that information, Ant has provided loans to half a billion people and has gotten about 100 commercial banks to provide most of the financing. In those arrangements, banks assume most of the risk of borrower default, while Ant takes the profits as an intermediary.
Employees at work at Ant Group in Hangzhou, China, in October.
Photo:
aly song / Reuters
Now the authorities are trying to overturn that business model, which has proven to be lucrative 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 as a bank, allowing it to provide more of its own resources in lending; They also plan to break from what they perceive to be the company’s monopoly on data, according to officials and government advisers with knowledge of the regulatory issue.
Ant declined to comment.
One plan under consideration would require Ant to enter his data into a nationwide credit reporting system operated by the central bank, the People’s Bank of China, say those familiar with the matter. Another option would be for Ant to share such information with a credit rating agency that is actually controlled by the central bank.
Despite being a shareholder in the credit rating company, along with seven other big data-driven Chinese companies, Ant has not transferred his data, the people say.
“Regulating data monopolies is at the heart of the issue here,” said an adviser to the Antitrust Commission of China’s State Council, the highest government body.
In the US, lawmakers have also stepped up efforts to crack down on Big Tech, arguing that companies like Facebook Inc.
and Google have used massive amounts of data to beat rivals. The tech giants have all denied wrongdoing.
Some analysts in China’s 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 would require access to the entire database, including proprietary information that Ant uses to analyze the creditworthiness of its customers.
Days before Chinese fintech giant Ant Group went public in what would have been the world’s largest stock exchange listing, regulators put the plans on hold. WSJ’s Quentin Webb explains the sudden turnaround and what the IPO suspension means for Ant’s future. Photo: Aly Song / Reuters (originally published November 5, 2020)
“It’s a good thing to make credit histories and scores public,” said 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 lending more competitive and prevent over-borrowing.”
For years, China’s financial regulators, led by the central bank, have strived to build a credit scoring system similar to the US FICO scores created by Fair Isaac. Corp.
, as a way to make it easier for lenders across China to assess credit risk and increase access to finance for both businesses and individuals. The effort is part of a broader “digital governance” initiative that aims to use data and technology to achieve greater social and economic control.
Mr. Ma, arguably the Chinese entrepreneur most identified with innovation in recent decades, has assisted government in a variety of ways over the years. Alibaba Group Holding Ltd., the e-commerce giant he co-founded in 1999, has used its data sources to help authorities track down criminal suspects and silence dissent. Ant’s Alipay payment app includes contact tracing features to help the government stem the coronavirus pandemic.
But in recent years, Mr. Ma opposes attempts by regulatory agencies to make Ant’s personal credit data more available, officials and government advisers familiar with the matter said.
In 2015, Ant started his own credit scoring system called Zhima Credit, which assigns ratings to many individuals and small businesses who had no credit history elsewhere.
Three years later, the People’s Bank of China launched a personal credit reporting company called Baihang Credit and invited Mr. Ma’s Ant, Tencent Holdings Ltd.
, which owns the popular WeChat messaging app and accompanying mobile payment network, and six other companies that will become Baihang Credit’s minority shareholders. The controlling owner is the National Internet Finance Association under the supervision of the central bank. The idea was to get Ant and others to share their customer credit data, which would then be accessible to financial institutions across the country.
However, the plan nearly failed. Ant declined to contribute what it considers his ownership data to maintain his competitiveness, officials and advisers say. Zhima Credit’s ambitions, meanwhile, have been scaled back, and the Ant unit is now essentially a loyalty program, offering perks to individuals with high credit scores, such as deposit waiver on the rental of cell phone, bike and car chargers.
Mr. Ma himself has been inundated by a regulatory storm in recent months. A public speech he delivered in late October, lashing out at President Xi’s signature campaign to combat financial risk and against financial regulators, infuriated the leadership and put Mr. Xi personally call off a long-awaited stock sale by Ant. , according to knowledgeable Chinese officials, and are ordering regulators to investigate the risks posed by his company.
Since then, regulators have used the oppression of Mr. Ma and his empire as part of a larger effort to strengthen surveillance of the country’s increasingly influential tech sphere.
In a private meeting with regulators in early November, Mr. Ma himself also said that the government “has all the parts of Ant as long as the country needs it,” said knowledgeable people. At the end of December, the central bank outlined a roadmap for Ant to restructure its operations, requiring, among other things, that the company be fully licensed to conduct its personal credit business.
In a statement from the People’s Bank of China, Deputy Governor Pan Gongsheng also broadly criticized the company for its “opposition to legal requirements.”
Mr. Ma has not appeared in public since his speech in October. Ant has scaled back some of its business in recent weeks, lowered credit limits for some individual borrowers, and removed online deposit products that financial regulators were disapproving of.
—Xie Yu contributed to this article.
Write to Lingling Wei at [email protected]
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