"If the banks won't change, we will change them."

When Jack Ma made this remark for the first time in 2008, Alipay had a history of less than four years and its user numbers had just exceeded 100 million.

10 years later, in June 2018, Alipay's parent company Ant Financial completed its $14 billion Series C financing at a valuation of more than $150 billion, the world's largest single financing to date.

Following the financing, the valuation of Ant Financial surpassed Baidu, next only to Alibaba and Tencent in China. Globally, among listed technology companies, only old-brand giants like Netflix and NVIDIA can rival Ant Financial. While among the unlisted technology unicorns, Ant Financial is firmly in top spot.

Barclays Bank has predicted that in 2019 Ant Financial will achieve profit of US$5.53 billion. Multiplied by a relatively conservative P/E ratio of 28, the valuation result is US$155 billion.

A P/E ratio of 28 far surpasses the average P/E ratio level of financial institutions. While the capital market grants a high valuation to Ant Financial, it is more inclined to define the giant as a technology or internet company, rather than a financial institute.

Ant Financial, the 'giant ant'

From the perspective of an internet product, this 'giant ant' has indeed reached a development peak. Cheng Li, CTO of Ant Financial revealed in mid-2018 that Alipay has nine local digital wallets around the world serving over 870 million people globally.

Years ago, the introduction of Yu'E Bao by Alipay marked the coming of internet finance to China. Yu'E Bao, P2P, mobile payment and smart credit gradually entered public view and profoundly influenced modern life.

The TMTPOST team once reported on the recent years of internet finance in China as a 'Great Rebellion'. Today the 'rebellion' is acquiesced to no more. After all the ups and downs, the self-support financial services of the internet giants are finally falling back into the grasp of traditional financial institutions.

The 'rebellion' started to weaken at the end of 2017. Regulators in China began reorganizing cash and internet loans by requiring off-balance-sheet assets, such as asset-backed securities (ABS) of microcredit companies, be included on balance sheets and uniformly regulated. It indicates that the frenzied days that saw microcredit firms issue nearly 350 billion yuan in high-leverage ABS in 2017 have come to an end.

In response, at the end of 2017, Ant Financial significantly increased funding for its two microcredit firms, and further introduced two services, 'Ant Credit Pay' and 'Ant Cash Now', to financial institutions. In this way, it takes money out of the banks' pockets to encourage people's use of credit.

Besides consumer financing restrictions, Ant Financial has also faced obstacles in other core financial businesses in recent years.

In the field of wealth management, the landmark Yu'E Bao has long passed its heyday. The redemption quota of 'T+0' inside one single day was prohibited by regulation, and fundraising behavior of non-bank institutions is no longer allowed. Under various pressures, the individual investment quota in Yu'E Bao fell time and again.

Ant Wealth is the main financial management platform of Ant Financial. It engages mainly in fund-based sales, though banks still dominate the field. In 2017, operational revenue of Ant Fund reached 746 million yuan, net profit 5.5536 million yuan. Compared with 2016, operational revenue in 2017 increased by 176% while net profit shrank 60%.

In the credit business field, in May 2018 the People's Bank of China took the lead in establishing Baihang Credit as the only market-oriented personal credit investigation agency with personal credit investigation license in China. An immediate result is that all internet credit investigation agencies, including 'Zhima Credit' under Ant Financial, an alternative to traditional credit-scoring mechanism such as Fico in the US, will be prohibited from engaging in the personal credit investigation business.

Clearly, all previous innovations and 'rebellions' in internet finance across all fields are now facing the prospect of full standardization.

"Had we anticipated the situation today, we would not have put a 'Jin' (a Chinese character meaning finance) in the name of Ant Financial (Ma Yi Jin Fu)." In June 2018, Chen Liang, vice president of Ant Financial, publicly claimed that the key word in 'Ma Yi Jin Fu' was not, in fact, 'Jin', but 'Fu' (a Chinese character meaning service). However, it is clearly 'Jin' that resonates most in the market.

Throughout 2018, the 'opening-up' of Ant Financial to the banking world progressed rapidly. Take May for instance - Ant Financial cooperated successively with Huaxia Bank, Everbright Bank and Shanghai Pudong Development Bank to work on fields such as AI, supply chain cooperation, biometrics and data risk management. On the other hand, Yu'E Bao started collaborating with several fund companies, while Ant Credit Pay established the necessary connections with banks and other financial institutions.