Beijing wants to dismantle Alipay, the super-app owned by Jack Ma’s Ant group with more than one billion users, and create a separate app for the company’s highly profitable lending activities, as it intensifies the crackdown on the big guys. Chinese technology groups.

Chinese regulators have already ordered Ant to separate from its main business, the company’s two lending units – Huabei, which is similar to a traditional credit card, and Jiebei, which provides small unsecured loans – into a new entity and bring in outside shareholders.

The authorities now want these lending companies to also have their own independent application. The plan would also require Ant to turn over the user data that underpins its lending decisions to a separate new credit scoring joint venture that is partly state-owned, according to two people briefed on the process.

“The government believes that big tech’s monopoly power comes from their control of data,” said a person close to financial regulators in Beijing. “He wants to end this. “

The move could slow Ant’s lending business, with the huge growth of Huabei and Jiebei partly fueling its planned IPO last year. The CreditTech branch, which comprises the two units, for the first time overtook Ant’s main payment processing business in the first half of 2020, to account for 39% of the group’s revenue.

The size of the unit, which helped issue about a tenth of the nation’s non-mortgage consumer loans last year, surprised regulators worried about predatory lending and financial risks.

Alibaba shares closed 4.2% lower in Hong Kong on Monday after the FT released an earlier version of this story. The Hang Seng Tech index, which tracks the largest Chinese technology groups listed in the city, lost 2.3% in the face of renewed regulatory pressure on the sector.

The ant was struggling with regulators for control of the new joint venture, but a compromise was reached that state-owned enterprises in his home province, including the Zhejiang Tourism Investment Group, would hold a controlling stake.

The provincial government has done Ant a favor by pushing local state-owned groups to become its new partners, residents said.

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“Given the mutual trust between Ant and Zhejiang, the fintech group will have a say in how the new joint venture works,” said a former official at the People’s Bank of China. “But the new setup will also ensure that Ant listens to the party when it comes to making critical decisions.”

A person close to Ant said that for now, Ma’s team will be leading the new business. “What does the Zhejiang Tourism Investment Group know about credit scoring – nothing,” the person said, noting that Ant executives were still worried about losing control in the future.

Reuters first revealed the composition of the joint venture indicating that Ant and Zhejiang Tourism Group would each take 35% of the shares with other public and private partners allocated smaller shares.

The new business will apply for a consumer credit scoring license, which Ant has long coveted. China’s central bank has issued only three licenses – all for state-run operations – preventing Ant from full monetization the vast reams of data he has collected on Chinese citizens.

But as part of the planned plan, Ant will lose its ability to independently assess the creditworthiness of borrowers. For example, a future Alipay user in need of credit would have their application routed first to the new joint venture credit rating company where their credit profile is held, and then to the new Huabei and Jiebei loan app to issue. credit.

Currently, the process is fully integrated with Alipay and Ant said it made “credit decisions in seconds” in its prospectus for its suspended IPO. The company did not respond to an email request for comment.

Ant will not be the only Chinese online lender affected by the new rules. This summer, the central bank told industry players that lending decisions should be made based on data from an approved credit rating company rather than proprietary data, one of the people said.

A senior executive at another online lender said this could result in a “moderate” reduction in its margin as the company can no longer use its own data to make lending decisions.

Additional reporting by Hudson Lockett in Hong Kong