Ant Financial says it doesn’t really compete with financial firms. Here’s why

Photo credit: Ant Financial

Ant Financial isn’t meant to be a financial services company, though it has been operating as one – at least for the last few years. After all, payments have accounted for much of Ant’s success, and the firm holds licenses to operate in key financial areas.

Its massive business has challenged China’s financial order and made traditional service providers like banks and insurance groups wary.

Contrary to common belief, however, the Alibaba affiliate has set out to be a technology – not financial – services firm catering to the traditional players, instead of replacing them. And it’s on track to reach this goal.

An ecosystem approach

Ant started out as Alipay, an escrow service for Alibaba’s Taobao marketplace, in 2004. As it grew into a goliath in its own right, it spun out in 2011, with Alibaba agreeing to keep a share of its profits rather than equity. It was only this February that Alibaba finally agreed to acquire a stake in Ant.

Since its spin-out, Ant has devised in-house products spanning banking, wealth management, lending, and insurance – services that have eaten away market share from financial institutions. Later on, it began offering its technology to those same institutions, turning them into enterprise customers.

Rather than be seen as a competitor, Ant wants to position itself as a technology partner of the traditional financial sector.

The way Ant operates is similar to Alibaba’s approach to ecommerce. Just as Alibaba provides marketplaces for sellers and buyers to trade, Ant runs platforms that allow financial services firms to reach end-users. These third-party providers pay Ant technology service and commission fees.

Ant also sells its software to help these traditional players beef up their internal products. For instance, Bank of Nanjing has been using Ant’s risk control technology and Huaxia Bank has leaned on Ant in its transition to blockchain, AI, and biometric verification.

“Like Alibaba’s ecosystem in the ecommerce industry, a similar ecosystem will emerge in the financial industry,” stated CEO Eric Jing when Ant officially launched as Alipay’s parent in 2014.

Opening up, gradually

If Ant wants to be an ecosystem instead of a purely financial company, why did it launch its own financial products in the first place? The fact that Ant has amassed a range of licenses has turned heads.

In response to the criticism, Ant’s vice president Chen Liang told media in late May: “We can’t make financial institutions the guinea pig, so we’ve become one.”

He explained that for a newly minted technology to mature, it needs to go through trial and error in real-life scenarios.

“Obtaining licenses doesn’t mean that our goal is to be a financial institution,” he added.

Regulatory pressure

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