Ant Group bets on overseas Alipay expansion to resuscitate profits

Article by Adriana Nunez | Nov 18, 2022

The news: Ant Group’s profit plunged 63% year over year (YoY) in the three months ending June 30, 2022, per Bloomberg. (Ant Group reports earnings a quarter behind most companies.) Performance changed dramatically from the same period last year, when profits increased an estimated 39% YoY.

Key context: Ant Group has been restructuring amid government crackdowns, which has complicated growth efforts and most likely hurt profits.

Last September, Beijing ordered Ant Group to spin off its loans business from subsidiary Alipay. To comply, Ant Group set up Chongqing Ant Consumer Finance Co., which houses short-term loan product Jiebei and virtual credit card Huabei—both of which have been used by a half-billion people in China.
Regulators were reportedly concerned that Alipay was pushing these credit products to its vast app user base—compounding China’s growing household debt crisis. And the bulk of these loans were funded by commercial banks, creating unbalanced risk between Alipay and the banks.
The new entity can extend credit from its own balance sheet or work with banks to extend joint loans. The government also has more transparency into who is obtaining loans.
But the firm has struggled to court investors to fund its loans: It had to scale back a multibillion-dollar funding round after one of its biggest investors, China Cinda Asset Management Co., abruptly pulled out of the investment plan. Chongqing Ant Consumer Finance Co. is still trying to raise 10.5 billion yuan ($1.5 billion).

What’s next? Facing a tighter regulatory environment in China, Ant Group is looking for growth overseas.

It’s been ramping up Alipay+—its merchant solutions suite that launched last year—across Asia-Pacific. Alipay+ lets merchants accept several popular mobile wallets with a single integration.
The solution can help Ant Group rake in more revenues and mobile volume outside of China. We expect 298.8 million people in Asia (excluding China) will use proximity mobile payments by the end of 2022, up from 269.7 million last year, per our forecasts.
Earlier this month, Alpay+ introduced D-Store, a one-stop shop for brick-and-mortar merchants that want to bring their business online. Popular brands like Burger King have already adopted the solution.
D-Store is likely to thrive as ecommerce grows and makes up a larger share of total retail sales across Asia. Ecommerce sales in Asia-Pacific are expected to hit $3.477 trillion by the end of 2022, per our forecasts.