Ant Group removes small banks’ online deposit products from its platform as it toes the line with China’s new fintech rules

Name: What is Jack Ma’s Ant Group and how does it make money?
Uploaded: 2020-12-18T09:00:12.000Z
Duration: 3 min 4 s
Description: What is Jack Ma’s Ant Group and how does it make money?

Small and medium-sized banks across China have used digital platforms as a way of attracting deposits

PBOC official worries such online-deposit products have high returns and low thresholds for accepting customers

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Ant Group operates China’s largest mobile payments app Alipay. Photo: Bloomberg

Alison Tudor-AckroydandEnoch Yiu

Published: 5:00pm, 18 Dec 2020Updated: 11:30pm, 18 Dec 2020

Ant Group, China’s dominant online payments service provider, has removed the deposit-taking products of several banks from its financial platform, as it falls in line to comply with tightening regulations in the world’s largest fintech market.

The company, based in the Zhejiang provincial capital of Hangzhou, removed interest-bearing time deposit products that mature in either three or five years offered by several small regional banks from its financial market place.

The three-year deposit products on the platform pay a top rate of 4.125 per cent while the highest interest for five years is 4.875 per cent per annum, near the upper limit of the central bank’s guidelines and more generous than returns by China’s state-owned banks.

By soliciting deposits on a nationwide platform used by up to 1 billion customers, those regional banks had been offering products with higher returns at lower entry thresholds than their larger rivals to customers, effectively skipping the geographical boundaries in China’s tightly regulated banking industry.

That is too close to the edge for the comfort of regulators who are particularly anxious to avoid any systemic risk to the banking system that may spill over to social unrest, or balloon into a global financial crisis. Average bad loans among China’s commercial banks rose to 1.96 per cent of total lending in the third quarter, promoting the central bank’s newly appointed financial stability director Sun Tianqi to inveigh banks to “safeguard asset quality in the wake of economic slowdown resulting from the Covid-19 pandemic.”

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What is Jack Ma’s Ant Group and how does it make money?

Ant Group is not the sole fintech company to be offering deposit products on its platform. Duxiaoman, a platform backed by the dominant Chinese internet search engine Baidu, and JD.com’s fintech unit JD Digits also offer links to financial products. Duxiaoman’s 10 banking partners are regional lenders such as NewUp Bank in Liaoning province, Xin’an Bank in Anhui, Huihe Bank in the Xinjiang region and Huatong Bank in Fujian. Huihe and Huatong are also featured among the 12 deposit products on JD Digits’ website, which directs visitors to the banks’ websites.