Ant Group (Part 2) - How Big is Small? 7 Mind-Staggering Facts You Need to Know

Ant Group was founded based on the principle that smaller is better, that smaller is more powerful, but how powerful exactly is this power of the collective?


In Part 2 of the Ant Group series, we dissect Ant's IPO prospectus to answer this question with seven mind-staggering facts you need to know.


If you've missed out on Part 1, be sure to check it out here.

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Ant size and scale
Source: Ant Prospectus

Fact #1: The Alipay app had over 1 billion annual active users and 711 million monthly active users as of June 2020.

Ant's predecessor, Alipay, whose function is still very much an important component of Ant Group, had over 1 billion annual active users as of June 30, 2020. Of these 1 billion users, 711 million were monthly active users of the app, while 80 million were monthly active merchants from over 200 countries. As of June 2020, the total payment volume through Alipay was RMB118 trillion in mainland China and RMB622 billion internationally, while in terms of digital finance services the Alipay app had 729 million annual active users.


Alipay interface
Alipay Interface

Both the number of monthly active users and total payment volume have been increasing over the past several years.


Alipay Monthly Activer Users growth
Source: Ant Prospectus
Total Payment Volume on Alipay
Source: Ant Prospectus

Alipay's growth was initially due to successful penetration of primarily first and second tier but also some third tier cities in China, although its future growth trajectory depends on Ant's ability to continue to expand to lesser tier cities.


Fact #2: Yu'ebao is the largest MMF in China and became the largest MMF in the world in 2017 with US$268 billion in AUM at its peak.

Ant's money market fund launched jointly with Tianhong Asset Management, Yu'ebao, is the largest MMF in China and became the largest MMF in the world in 2017. Recognizing the systemic risk implications posed by a fund of this size, the Chinese securities regulator imposed reserve requirements and restrictions on the types of assets that MMFs could hold in the same year, while Ant itself capped the total amount each investor can invest on the Yu'ebao platform to RMB100,000.


Since then competitor banks have sprung up with similar MMFs and other financial products that offer similar or higher yields, while the People's Bank of China initiated "targeted cuts on reserve ratios" in 2018 which reduced the required reserve ratio for many banks. With excess cash at hand, Chinese banks became less reliant on overnight repos for funding and also offered lower rates for certificates of deposit. MMFs in China traditionally generated a portion of their returns from repo transactions with banks and investments in CDs, so the central bank's monetary easing policy ultimately led MMF investors to flee elsewhere in search of higher yields.


This was clearly reflected in the downsizing of Yu'ebao from RMB1.81 trillion in March 2018 to RMB106 trillion in December 2019. However, whilst MMFs by JP Morgan and Fidelity have superseded Yu'ebao to be the world's largest money market funds, Tianhong AM is still the biggest mutual fund company in China and the number of users on the Yu'ebao platform has been growing with over 600 million investors at the end of 2018. This is partly due to the increasing penetration rate of Alipay as Ant expanded to smaller cities in China where users tend to have lower income levels but still want to generate some basic yield on their checking accounts.


In terms of business model, Ant has also reacted to the increasing competition by allowing investors to choose from third party MMFs that are not managed by Tianhong AM on the Yu'ebao platform. Initially, investors who put their money in Yu'ebao could only invest in an MMF managed solely by Tianhong Asset Management (which Ant has a 51% majority stake in). As of June 2020, investors can choose MMFs from 24 third-party mutual fund companies on Yu'ebao.


The latest figures from Q1 2020 shows that Tianhong's fund on the Yu'ebao platform alone has an AUM of RMB1.2 trillion, while Ant's InvestmentTech platform as a whole had over 500 million users at the end of June 2020.


Fact #3: Ant's CreditTech platform is the largest online consumer and SMB credit services provider in China, with a consumer credit balance of RMB1.7 trillion and an SMB credit balance of RMB0.4 trillion having been enabled through the platform.

Ant's CreditTech platform is the largest online consumer and SMB credit services provider in China, as the company works with 100 partner institutions ranging from large scale multinational and national state-owned banks to local banks and trust companies to provide credit access for over 500 million consumers and over 20 million small businesses as of the year ended June 2020.


Ant CreditTech growth
Balance of consumer and SMB credit enabled via the CreditTech platform as of the end of the 12-month period. Source: Ant Prospectus

The two consumer products in CreditTech are Huabei and Jiebei. Huabei functions like a virtual credit card where consumers can pay in installments for everyday goods that they purchase from Alibaba or from Alipay partners who choose to opt in the program. The second is Jiebei, a platform through which borrowers can take out small loans for larger consumption transactions. To be eligible for Jiebei, prospective borrowers must have a credit history with Ant.


Similarly, Ant also offers financing solutions for small businesses, primarily with MYBank as a partner. MYBank was founded in 2015 with Ant as a founding shareholder to provide credit to underserved small businesses in China. As of the end of 2019, MYBank has provided credit to 20.8 million SMBs. We discuss more about the Chinese credit markets and banking system as well as MYBank in Part 3.


Fact #4: Ant's InvestmentTech is the largest online investment services platform in China with an AUM of RMB4.1 trillion generated through the platform as of June 2020

Ant's InvestmentTech arm is the largest online investment services platform in China as measured by AUM matched and distributed through the platform. Ant partners with a wide range of financial institutions including mutual fund companies, insurance companies, banks, and securities companies, to provide a wide variety of investment products that serve more than 500 million users as of June 2020.


Ant InvestmentTech growth
Balance of AUM enabled via the InvestmentTech platform as of the end of the 12-month period. Source: Ant Prospectus

Roughly RMB1.2 trillion of the RMB4.1 trillion (about 29%) total AUM generated via InvestmentTech is from Tianhong's fund on the Yu'ebao platform. However, the InvestmentTech platform also includes other products such as Yulibao, which is a version of Yu'ebao for small businesses, and Dalicai, an online market place for investors to shop for investment products with various risk profiles beyond the basic MMF offerings. There are over 6,000 Dalicai products to choose from including fixed income and equity mutual funds, fixed term products, and bank deposits. The contribution of Dalicai to total AUM has been increasing over the past few years.


Fact #5: Ant's InsureTech is the largest insurance services platform in China with RMB52 billion in insurance premiums enabled through the platform

Ant partners with 90 institutions to provide a diverse selection of over 2,000 insurance products to meet the needs of more than 750 million users. Product offerings don't just include the traditional life, health, and property and casualty insurance, but also innovative new products such as Xianghubao, a mutual aid program, Quanminbao, a pension annuity product, in addition to a multitude of other options such as scenario-based shipping return insurance for online consumers and merchants, and phone screen breakage and credit card theft insurance.

Ant InsureTech growth
Premiums/contributions enabled via the InsureTech platform as of the end of the 12-month period. Source: Ant Prospectus

The insurance penetration rate is quite low in China at only 4% in 2019. However, there are significant growth prospects as the Chinese economy continues to develop (we discuss China's insurance sector further here), and Ant has been taking advantage of this growth by educating consumers on their platform and raising awareness about insurance needs. Due to the broad scope of Ant's business operations, the company is able to produce targeted, personalized recommendations based on comprehensive user data while also innovating new products to meet consumers' constantly evolving needs.


Fact #6: Ant booked in total revenues of RMB72.53 billion and an operating profit of RMB24.9 billion during the first half of 2020.

Ant reported total revenues of RMB72.53 billion and an operating profit of RMB24.9 billion during the first six months of 2020. 36% of total revenues are from digital payments and merchant services (primarily Alipay), while 39% are from CreditTech, 15.6% are from InvestmentTech, and 8.4% are from InsureTech.


Ant revenue breakdown
Source: Ant Prospectus


Ant revenue breakdown
Source: Ant Prospectus

The share of digital payments and merchant services in total revenues has been declining over the past few several years (down from 55% in 2017) in spite of the growth of Alipay, while InvestmentTech’s share of total revenues has been relatively stable, and CreditTech’s and InsureTech’s shares are increasing (from 24.8% and 3.5% in 2017 respectively).


Fact #7: Zhima Credit is the de facto credit scoring system in China that can make or break your everyday experience.

Ant's credit scoring system, Zhima Credit, has become the de facto credit scoring system in China. Zhima Credit collects a wide range of information from Alibaba's users, Ant’s CreditTech platform as well as the Chinese government’s credibility blacklist to generate credit scores for individuals. With a good Zhima Credit score, consumers are able to borrow higher amounts from Huabei and Jiebei, in addition to enjoying the convenience of not having to pay deposits for various services such as bike-sharing, powerbank-sharing, car rentals or hotel check-ins.


Zhima Credit interface
Users of Zhima Credit are able to see their dynamically calculated credit score in real time.

Since 2017, Zhima Credit started providing credit scores for corporates using data gathered from Ant's platform, along with data from partner institutions, the Chinese Department of Commerce, and the Customs Department.

Starting from Part 3, we'll be decoding the secrets to Ant's success by analyzing the economic and financial backdrop that led Ant to develop the lines of business they did and discussing the factors that made those business decisions successful.


Check out the entire Ant Group series here:

Part 1 - What You Need to Know About History's Biggest IPO

Part 2 - How Big is Small? 7 Mind-Staggering Facts You Need to Know

Part 3 - Decoding the Success of a Miniscule Behemoth (SMB Credit Edition)

Part 4 - Decoding the Success of a Miniscule Behemoth (Consumer Credit Edition)

Part 5 - Decoding the Success of a Miniscule Behemoth (Investment Markets Edition A)

Part 6 - Decoding the Success of a Miniscule Behemoth (Investment Markets Edition B)

Part 7 - Decoding the Success of a Miniscule Behemoth (Insurance Markets Edition)


Ant Group Updates:

What Happened to Ant Group's IPO? Interpreting the New Online Microlending Regulations in China


Investing in China (Equities)

A Guide to Chinese Share Classes

How To Invest in China's A-Shares


Investing in China (Fixed Income)

Introduction to China's Fixed Income Markets

How To Invest in Chinese Bonds


Glossary of All China-Related Terminology:

CN Glossary


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