New measures by the Chinese Central Bank (PBOC) target Ant Group and Tencent again. On Wednesday, January 20, 2021, the PBOC announced that any non-bank payment company that supports at least 50% of online transactions would be the subject of an antitrust investigation. The Chinese financial authority also mentioned monitoring changes in shareholdings in the fintech sector. “The rules fill the void in defining a monopoly in the payments industry,” said Dong Ximiao, a researcher at the Zhongguancun Institute of Internet Finance.
With 55.6% of transactions for nearly a billion users, Alipay – affiliated with Ant Group – is of course concerned. In addition, the central bank is interested in the dominant position that several actors exercise together. Two companies that share two thirds of the market can also be the subject of an antitrust investigation. With 38.8% of mobile payments, Wechat Pay fits into this second scenario. On the flip side, new players are trying to take advantage of the situation, including Douyin (Chinese version of TikTok) who created a digital wallet. In addition, the JD brand has anticipated future actions by restructuring its financial operations. In addition to the current rules, a global analysis correlates the current active regulation with the impending exit of the digital yuan.
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These measures are not the first to target Chinese fintechs. Unsurprisingly, they hurt the growth of these companies. “This shows that stricter fintech regulations do not offer a deadline,” says Dong Ximiao. If a monopoly position is confirmed, restrictive measures such as the dismantling of the companies concerned could be taken. Prior to arrival, the PBOC gives companies a year to adapt to these new competition rules.
According to estimates by analyst Francis Chan, the value of Alipay fell to 1,000 billion yuan (around 126 billion euros) in January 2021. Previously, it was valued at 1.4 trillion yuan. According to him, splitting Alipay could cut its value in half. “The rating of the Ant Group could fall further if the payment service has to be cut due to possible antitrust investigations by the Chinese central bank,” wrote Francis Chan in a research note.
Jack Ma reappeared in a video on the day of the PBOC announcement on Jan. 20. After its release, Alibaba, the parent company of Ant Group, increased its stake by 8.5%. That growth didn’t last, however, and the stock then fell another 2.5%.
In June 2020, internet payments in China were up 8.8% year over year. Paradoxically, this increase represents a decrease. In 2019, online payments increased by 23% and in 2018 to 65%.