Tech giants face tighter financial regulation, media reports say

After the Chinese government suspended Ant Group’s stock market listings, there was a sudden catch-up over how to implement more effective financial regulation of the fintech giants.

Data shows that Ant Group has accumulated 2,154 billion yuan of credit scale, 98% of which comes from cooperative bank and ABS.

Ant group is a company spun off from Alibaba. The company has positioned itself as a technology company, but financial regulators say it also falls under their regulatory purview.




Ant Group was founded in 2004 as a payment service provider for Alibaba. In China, its core app, Alipay, has more than 730 million monthly users.

Ant Financial has also created an empire that matches Chinese borrowers with lenders, allowing users to apply for short-term loans in minutes. In addition, the company uses artificial intelligence and other advanced technologies to promote payment and credit services and further expand its business with products from insurance to asset management.

Ant group says this means it is mainly a technology supplier to financial institutions. Founder Jack Ma also said ant group is more like a “tech finance” company than a “fintech” company.




But skeptics are namores. They said financial regulators were unlikely to reduce their focus on the company because it had just changed its name from Ant Financial to Ant Group this year.

It has also sparked a debate in the financial sector about whether the co-lending model is free of regulation, leading to brutal growth.

On October 31, 2020, Chinese regulators held a special meeting, pointing out that the current rapid development of fintech and financial innovation must properly handle the relationship between financial development, financial stability and financial security.



In the industry’s eyes, this means that the relevant departments are very concerned about the balance between the fintech boom and risk management to avoid potential systemic risks.

It’s worth noting that as Chinese authorities tighten financial risk control, many financial regulators in the U.S. and other countries are also monitoring tech giants’ financial exposure.

Journalist Gabriel Nedelec recently published a report on the website of The French newspaper Les Echos on November 22 entitled “Financial Regulators Tighten Control over GAFA”. Financial regulators are increasingly wary of tech giants touching the financial sector, the report says.

Google’s announcement that it will open checking and savings accounts in its Google Pay app from 2021 is likely to cause some resentment. The first is the banks, at least those that do not belong to the tech giant, because it is about a strong competitor reaching the heart of the banking industry. But the malcontent also include financial regulators.

Indeed, financial regulators are increasingly wary of tech giants such as Google, Apple, Facebook, and Amazon, arguing that they pose a risk to the stability of the financial system. Because the tech companies have sought to solve the payment problem in the first place, but have not complied with the most binding rules, they have taken their first steps toward the financial sector, but they are very different from those players in history.



Big tech companies such as Facebook, Alibaba, Amazon, Google, and Tencent have irreplaceable advantages in banking, and if so, the tech giants will increasingly overtake traditional financial services banking. It is the ability of large tech companies to collect large amounts of data at near zero cost that could easily lead to the rise of “digital oligarchs.” Once the data dominates, these tech giants are likely to face price discrimination.

Big tech firms are different from Fintech firms. While fintech companies use digital technology to provide financial services, the big tech companies do the opposite: their main business is technology, not finance.

Big tech’s involvement in finance began with payment services, particularly in China. Here’s where mobile payment technology solutions really take off: in China, mobile payments for consumption account for 16% of GDP, compared to less than 1% in countries such as the US and the UK, where credit cards are more popular.

Big tech companies also extend credit or sell insurance and savings products either directly or in partnership with financial institutions. Even scarier is Facebook’s plan for a digital currency.




The latest episode in this balance of power flared up earlier this month. With 48 hours to go before the listing of Alibaba’s Ant Group, Chinese regulators have taken the dramatic step of abruptly halting the listing. It is impossible for Beijing to lose control of the giant behind Alipay.

The latest episode in this balance of power flared up earlier this month. Forty-eight hours before the IPO of Alibaba’s Ant Group companies, Chinese regulators took the high-profile measure to stop the listing.

Chinese authorities have said ant group is likely to face more scrutiny in the future and may be subject to the same capital and leverage restrictions as Banks.

This restriction has delighted traditional financiers.

Another sign of growing vigilance among regulators is the authorities’ opposition to Facebook’s digital currency program. In the face of this resistance, a group led by Facebook founder Mark Zuckerberg has been forced to scale back its ambitions significantly. “It has long been recognised that there is a real risk of stability and sovereign risk if digital giants can act,” said a person familiar with the matter. The longer the tech giant’s business reach, the more financial stability, competition, and privacy issues emerge.

Google’s latest foray into banking suggests that the tech giants’ appetite will not stop there. That would not let financial regulators off guard. The covid-19 crisis has accelerated the digitisation of transactions, mainly contactless payments, so the balance of payments is likely to tilt somewhat more towards the tech giants.

Technology giants in the financial industry have attracted increasing attention, and the tech giants involved in the financial industry’s regulatory situation have gradually reached a consensus.

Source: French newspaper Les Echos and other media