Ant Financial eyes credit score system for China

The Series B round values the Alibaba financial affiliate at nearly $60 billion, up from $45 billion a year ago.

Ant Financial Services Group is stepping up efforts to create a credit scoring system that can quickly access the credit history of China's 650 million internet users, according to two people familiar with the company.

With the help of a $3 billion war chest that it soon hopes to amass through a second round of private funding, the Alibaba financial affiliate hopes such a system will facilitate even more online shopping and support earnings by making consumer credit more accessible.

Ant Financial, which is controlled by Alibaba’s chairman Jack Ma, owns Alipay, the Chinese equivalent of PayPal, which has supported Alibaba's marketplaces for more than a decade and now provides users with consumer finance as well payment services. Shoppers on Tmall and Taobao can take a 30-day repayment loan through Huabei, the online personal line of credit that Alipay users can sign up for after just a few clicks, subject to credit clearance.

“The credit scoring system has a huge growth potential in Chinese, where only three out of ten Chinese people have a credit history with the Chinese central bank,” said one of the people familiar with the company, who requested anonymity because the Series-B funding has yet to close.
More than 60 million payments for purchases on Alibaba's Nov 11 Shopping Day were made through Huabei, representing 8.5% of Alipay's total transactions on that day.

Ant Financial, whose eventual initial public offering is hotly anticipated, is set to close the Series-B funding round by mid-April. That could raise it more than $3 billion in fresh capital, valuing the fast-growing internet company at nearly $60 billion valuation, up from $45 billion just one year ago.

The higher valuation would suggest that some larger investors are still willing to pay a fat premium for the very best internet startups, notwithstanding general concerns about overly expensive share valuations in the technology sector and a pickier stock-buying climate.

“A strong private fundraising market has helped technology startups steer clear of [the] burdensome IPO process in China,” the second source familiar with the matter said. “Investors shrug off concerns about valuations and growth prospects as Alibaba has built a solid track record of monetisation in China’s internet market.”

“Its consistent execution and high-quality management team has been highly regarded by investors,” the person added.

Goldman Sachs, JP Morgan, and CICC advised Ant Financial on its latest funding round.

The success of Ant Financial's latest funding efforts could buttress investor sentiment as other major Chinese technology plays also prepare to bring out the begging bowl.

WeBank, in which Tencent has a 30% stake, is also looking to raise about $1 billion, valuing the company at $5 billion, according to people familiar with the company. 

That is after Chinese P2P loans market operator Lufax completed $1.22 billion of funding in January, valuing the Ping An-backed company at $18.5 billion compared with $10 billion in March last year, when it sold Rmb3 billion-worth of stocks in a private placement. Separately, said its financial affiliate -- JD Finance -- raised $1 billion from its series-A round, valuing the company at more than $7 billion.

International expansion, IPO

Ant Financial, spun off from Alibaba in 2011, runs Alipay, which has more than 400 million active users. It also runs China's largest online money market fund, Yuebao, and food-ordering app Koubei.

Beyond China, Alibaba and Ant Financial became the largest shareholder of One97 Communications, the parent of India e-commerce company Paytm, by investing $680 million in September, underscoring its ambition to grow beyond China.

More recently, Ant Financial hired veteran lawyer Leiming Chen as global general counsel and senior vice-president in charge of legal and compliance as well as risk management, as it prepares to look beyond China to sustain its heady growth rates.

According to a Morgan Stanley report, India's internet market is expected to grow from $11 billion in 2013 to $137 billion by 2020, driven by a mixed bag of mobile user and income growth.

Ant Financial, formerly known as Zhejiang Ant Small & Micro Financial, completed its initial round of fundraising in June 2015, valuing the fintech company at about $45 billion. According to bankers familiar with the company, Ant Financial may mull a late 2016 or 2017 listing if the conditions are right.

They said the company may decide to list their shares in more than one market, as the company continues to expand beyond China's consumer market.

"An IPO may happen in both China and Hong Kong stock markets depending on market conditions," said one senior banker at a US bank in a previous meeting.

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