Ant Financial IPO Shows Chinese Innovation Is Ahead
China has been more advanced in its mobile E-commerce and digital transformation economy, likely since 2017 It is pushing ahead in Fin-Tech, block chain, state backed digital currency and consumer convenience. Ant Financial’s dual IPO in China demonstrates this well.
For investors in North America a good way to get in on this is the ETF, $KWEB.
So how innovative is Ant Group in fin-tech? Well, the company reported a 1,000% jump in profits in the first half of 2020 from the same period last year. That’s not just an outlier, that’s a global leader and Jack Ma has a considerable stake again here.
It could also be the biggest IPO of all time and it’s important to note it’s not even occurring in the U.S. The 2020s are likely the last decade of American supremacy in technology, AI and health-tech companies. This suggests China’s economy won’t just zoom ahead of the U.S. but the future of AI, technology and the biotech sector is likely to be Chinese-led in the 21st century.
Ant Group will be the Biggest Dual Listed Chinese IPO of All Time
The company is planning a concurrent listing on the Shanghai stock exchange’s STAR market and the Hong Kong stock exchange. Politics aside, Alipay payments make Ant Group the leading fin-tech company in the world. Eventually, I think, it will out-compete the likes of PayPal, plastic (think American Express) and even Square (as great as those businesses are).
So how profitable is Ant Group? There again the company is controlled by Alibaba founder Jack Ma, and had profit of 21.9 billion Chinese yuan ($3.2 billion) on total revenues of 72.5 billion yuan in the first half of the year, according to the exchange filing.
Companies like Huawei, ByteDance, Didi, Meitaun and Ant Group are very misunderstood in the West, since they represent significant improvements in innovation and competition in the Darwinian fitness of global capitalism. We have to assume they are in part state-backed, and therefore have a different playing field altogether.
That Ant Group is likely to be the biggest IPO of all time is very significant. It shows how fast China has produced top tier level companies that will significantly shape the decades ahead.
Chinese IPOs are really impressive in 2020, with Nio competitors Li Auto and Xpeng (also backed by Alibaba) going live. China is likely to be the key EV sector in the years ahead.
Like the sleeping giant innovative AI company that is ByteDance, Ant Financial is pretty innovative. The company’s flagship Alipay app has helped drive the boom in mobile payments in China and understands how to monetize and will expand globally. Just as JD is to logistics and Pinduoduo is to social commerce, China is producing a consistent stream of more innovative new companies than the U.S.
China’s Integrated Technology Ecosystem Is Superior in Darwinian Capitalism
One of the reasons for this is how Chinese giants do venture capital and most especially the Alibaba companies. Ant Group itself is also a major investor in startups, despite being considered a “unicorn” itself. It has formed joint ventures for services like local delivery.
China’s attack play on digital transformation is more radical than the U.S. can accomplish and its goals in AI are significantly more ambitious (as demonstrated by the facial recognition startups that are huge, think SenseTime).
Ant Financial’s IPO is in a sense China’s coming out party. Revenues are also up significantly, climbing about 38% from the 52.5 billion yuan the firm made in the first half of 2019. How much is this spin-off of Alibaba worth in 2020? The company is targeting a $US225 billion valuation and could raise as much as $US30 billion in the deal if demand holds up. China can produce companies of global scale very efficiently as of 2020.
Ant Group’s future is also very bright, with Chinese consumers as more mobile native than Americans or Europeans or Japanese. Ant plans to speed up its formation of an online marketplace for everything from household goods to loans. The company most recently began pushing into the financial industry, leveraging data from its Alipay app to offer customers robo-advising and banking services.
Ant, 33% owned by e-commerce giant Alibaba Group Holding, has already amassed a range of financial licenses including payments, online banking, insurance and micro lending. So that’s where the innovation has really occurred, through very smart diversification. That’s also how ByteDance will scale in ways Facebook never did, giving it much more reach into the 21st century of technology events.
Ant Group, formerly known as Ant Financial, shows China’s bold moves in tech innovation, moves that the U.S. isn’t following. It’s being left behind. How big is Alipay? The main payment method of Ant Group has over 1 billion annual active users and processed 118 trillion yuan in transactions in mainland China in the 12 months ended June 30.
The platform also has an international presence, with an annual transaction volume of 622 billion in markets outside China. With a Chinese digital currency, you can easily see how it might disrupt the U.S. dollar as the default global currency.
The Chinese consumer isn’t just the center of global capitalism, they are the center of consumer-centric innovation. Ant Group will continue to mature. In China, $67 trillion in transactions were conducted on mobile devices in 2018, according to estimates by the research firm Bernstein.
Ant Group Shows China’s Recovery from the Pandemic Will Be More Robust
E-commerce is up around 40% so far in 2020 due to the pandemic but China’s recovery is faster than that of the U.S. This means Chinese tech giants will eventually be pushed up by that. Ant Group will pivot more into consumer finance.
Why is that? Internet-based consumer financing in China, a lightly regulated sector, surged 400 times to nearly 8 trillion yuan, in four years to 2018, according to the Guanghua School of Management.
Ant Group as its own entity must be put into the tech dynasty China has created in just the last twenty years. It’s almost like witnessing the future of Fin-Tech at work. Ant Group is a customer service genius with Alipay being ubiquitous in China and maybe globally later in the 21st century.
Ant Group could be the method by which China scales its social credit system eventually to the world. With a dual listing in China it’s protected from U.S. moves to block it.
Among all 2020 IPOs, Ant Group’s might be the most impactful for the future. China might win with payments, since the convenience is so high. Credit cards might one day go extinct since the high fees scam consumers. Ant Group is the alternative. Coupled with a Chinese digital currency, forget Libra and the U.S dollar’s ability to maintain its dominance.
Ant Group could also disrupt banks, with a valuation of over 200 Billion that’s already bigger than many U.S. banks. This is what Apple must dream of doing with Apple Pay and its expanding services platform. Think about it. Once people were using Alipay to stash their cash and pay for online purchases, Ant could begin offering them other kinds of services through the app, including personal loans and insurance policies. That’s like the Amazon Prime eventually of the next app-economy.
The Chinese are smarter in how strategic they are in thinking of the future of how digital transformation scales. Smarter in venture capital, how companies complement each other and how new sectors will scale globally. China is already the leader in facial recognition AI companies, E-commerce mobile offerings and a host of other sectors with blockchain, Fin-tech and payments among them.
Ant Group is a triumph for China’s emerging strategic thinking in the future of technology. Alipay says it has 900 million users in China. What if it was able to get more users globally? How would China’s digital currency power that shift? What really is the future of payments, loans and insurance? China might have some surprising answers to offer the world.