Ant Group Co has been ordered by the Central Bank of China to reexamine its fintech businesses, which include wealth management, consumer credit lending, insurance and more, and return to its roots as a payments service. Ant Group Co is one of Jack Ma’s most lucrative ventures. The central bank has said that Ant used its dominance to exclude its rivals. Also Read - Jack Ma's Alibaba fined record $2.7B by China
The regulators have announced that it is essential for Ant Group to “understand the necessity of overhauling its business,” and come up with plan and timetable soon. Apart from this, the authorities have also berated Ant for sub-par corporate governance, disdain toward regulatory requirements and engaging in regulatory arbitrage. Also Read - Tech billionaire and Alibaba founder Jack Ma missing after conflict with Chinese govt
Ant Group responded to the central bank stating that it will set up a special internal team to comply with all of the demands. It will continue to maintain business operations for users and will not be increasing the prices for its consumers and financial partners. However, it will be stepping up risk controls. Also Read - India bans 43 more Chinese apps over security concerns
The regulators have stated that Ant can create a separate financial holding firm, which will comply with all of the rules.
Optimists are saying that the central bank is just re-asserting their right to oversee the country’s financial sector. They say that sending a warning to internet companies to make changes without drastically changing the structure. However, many others are saying that the outcome can be a lot worse if the regulators were to break up the Ant Group or if it made it forgo its money management, credit and insurance businesses completely.
If the company was made to break up, it would complicate the shareholder structure and hurt its overall value. But if the Ant Group was made to forgo its money management business, it would halt its operations in the units that service half a billion people, and will also hurt the company’s valuation in a drastic manner.