Chinese regulator asks Ant Group to return to payment services roots

During the weekend, the People’s Bank of China told Ant executives to “rectify” the fintech giant’s lending, insurance, and wealth management businesses, though it didn’t directly ask for a breakup of the firm. The central bank also asked the company to “understand the necessity of overhauling its business” and create a timetable for these changes soon.

Since Ant launched Alipay in 2004, the company has evolved from offering a PayPal-like service to running a set of businesses including consumer credit payment and wealth management, among other services. With the new orders, however, Ant will have to set up a separate financial holding firm to make sure it has enough capital and protect users’ private information, said the central bank.

Last week, China kicked off an investigation into alleged monopolistic practices at Ant’s parent firm Alibaba Group and summoned Ant Group to a meeting over financial regulations. Ant said on Sunday that “it will set up a special team to create proposals and a timetable for an overhaul.” It will also maintain business operations for users and vows to keep costs for consumers and financial partners unchanged while “stepping up risk control.”

Meanwhile, Alibaba on Monday announced that it will upsize the company’s share repurchase program from US$6 billion to US$10 billion. The program will be effective for a two-year period through the end of 2022. Following the announcement, shares of Alibaba in Hong Kong fell over 7% to HK$207.2 (US$26.73). Other internet firms – Tencent and Meituan – dropped over 6%.

Last month, Ant Group was notified of the suspension of its US$35 billion IPO less than 48 hours before its anticipated listing after regulators said it failed to meet the listing qualifications or disclosure requirements. Shortly after that, the government released draft anti-monopoly regulations.

The draft rules are aimed at preventing monopolistic behavior by internet platforms – a move that may have an impact on some of China’s biggest tech companies such as Alibaba’s Taobao, JD.com, Pinduoduo, Tencent’s WeChat Pay, and Meituan Dianping.

Update (December 28, 18:37 pm): This article has been updated to include Alibaba’s share repurchase program. 

Currency converted from Hong Kong dollar to US dollar: US$1 = HK$7.75.