How the US System Compares

On 3 November 2020 the planned listing of Ant Group, the Chinese payments and lending company that runs Alipay, was suspended days before trading was due to begin. The dual listing in Shanghai and Hong Kong had been set to raise about $34 billion or more, the largest IPO ever at the time. Days earlier the company's founder, Jack Ma, had publicly criticised China's financial regulators (reported). Ant had grown from an escrow service for the Taobao marketplace, launched in 2004, into a super-app that offered payments, a money-market fund, Yu'e Bao, that was briefly the world's largest at about ¥1.7 trillion, consumer credit, small-business loans and insurance. It mostly originated loans for partner banks and kept a technology fee, carrying little capital itself.

Regulators ordered Ant to become a regulated financial holding company, fund a larger share of the loans it originated, separate its credit data and shrink Yu'e Bao. Ma gave up control in January 2023, and in July 2023 Ant was fined about ¥7.1 billion (reported). An American reader will recognise the structure: a technology company that owns the customer and the data, a partner bank that holds the loans, and a regulator that eventually decides the arrangement is a bank in all but name. This short chapter compares the US system with others, not to recommend them, but because each comparison shows something about American finance that is easy to take for granted.