Alibaba’s Ant Financial Closes Private Placement of Shares, China’s Social

Ant Financial owns a 30% stake in the newly launched bank.

Ant Financial startup that operates Alipay, Alibaba’s payment business and Yu’E Bao, its wealth management product, has more than 400 million active users and 17 million overseas users.

The investment amount was not disclosed, but it is landmark moment for China’s financial industry, where private internet companies like Alibaba are now competing against traditional state-owned banks such as Industrial and Commercial Bank of China-with the blessing of the central government. It is also experimenting with credit scoring, using criteria such as consumers’ online payment history to assess their credit worthiness.

While the opening of MYbank is no doubt a boost to the development of Ant Financial, the online bank is not the most valuable asset of the Alibaba empire. “We want to become the strongest growth engine for global Internet finance, ” said company’s new President Eric Jing.

At the opening ceremony for MYbank, Alibaba Group founder Jack Massachusetts said the bank will offer loans of no more than 5 million yuan (US$806,000).

The state-run Shanghai Securities News had reported in February that Ant Financial was seeking to raise up to $4 billion in a private placement of shares.

Lucy Peng, CEO of Ant Financial, also said that the bank aims to serve small and medium enterprises and big-spending consumers. In the recent past, regulators have sanctioned approvals to tech companies to participate in the country’s finance sector.

The company also introduced “Le Ye Bao”, which allows businesses to buy insurance cover for staff at a relatively cheaper rate, said Jing, who was formerly Alipay’s chief financial officer.

Mr. Massachusetts now controls the financial service company, while Alibaba has a 37% stake in it. Back in 2011, due to the restrictive Chinese government rule with respect to foreign proprietorship of financial services entities, Mr. Massachusetts spun off the online payment service from the e-commerce giant. The outside investment is expected to continue following this Series A round. The exponential growth could be the reason for the investors to be drawn to the company. Analysts say Ant Financial’s valuation is huge because it had an early start in online payments and because it is already a dominant player in China.