Here is an interesting piece from Fintechzoom on Ant Financial and digital money.
Note that some of the references may appear as typos, but they are not. This is a U.K. news source.
- IN 1300 OR so Marco Polo, a Venetian service provider, launched Europeans to a financial marvel witnessed in China.
- The emperor, he wrote, “causes the bark of trees, made into something like paper, to pass for money all over his country”.
- Finally the West additionally adopted paper cash, some six centuries after China invented it.
Now, Ant Financial is in front of digital money, in the world’s largest market.
- China’s pre-eminence in digital cash is prone to be on show within the subsequent few weeks with the monster itemizing of Ant Group, its largest fintech agency, in Hong Kong and Shanghai.
- Measured by cash raised, it would in all probability be the most important preliminary public providing in historical past, beating Saudi Aramco’s final yr.
- As soon as listed, Ant, which was shaped in 2004, may have an identical value to JPMorgan Chase, the world’s greatest bank, which traces its roots to 1799.
- The earliest predecessor of JPMorgan Chase, the Manhattan Company was founded by Aaron Burr in April of that year.
- Burr led a group of prominent New Yorkers, including Alexander Hamilton, in obtaining a charter from the New York State Legislature for a company to supply “pure and wholesome” water to the residents of New York City, whose inferior water was thought to be the cause of frequent epidemics of yellow fever.
- The unusual charter included a clause allowing the company to employ its excess capital in any activity “not inconsistent with the Constitution and laws of the United States.” This provision enabled the company to engage in banking activities.
…But, I digress. Back to the Ant Financial.
- Jamie Dimon, JPMorgan’s boss, and others have stored a cautious and admiring eye on Ant for years. Spun off from Alibaba, an e-commerce agency, it has over 1bn customers, largely in China, and its funds community carried $16trn of transactions final yr, connecting 80m retailers
- Funds are simply the appetiser [sic]. Customers can borrow cash, select from 6,000 funding merchandise, and purchase medical health insurance.
The article poses two risks towards digitalization of money:
- The primary is that it may destabilise the monetary system. Fintech companies swarm to probably the most worthwhile components of the business, usually leaving much less revenue and a lot of the threat with conventional lenders. Absolutely 98% of loans issued via Ant in China in the end sit on the books of banks, which pay it a charge. Ant is ultimately anticipated to seize a tenth or extra of Chinese language banking’s earnings.
- The second hazard is that the state and fintech “platform” companies may seize extra energy from people. Community results are integral to the fintech model—the extra folks use a platform the extra helpful it’s and certain that others really feel drawn to it.
Here is the short story on cash and digitalization. First, it can displace the monetary system, even if it is driven by sovereign entities. Right now, we operate on a fiat money system. Money is worth what reserve banks say it is worth because there is a government entity behind it. Unlike the old days of trading gold and silver-backed notes, a Euro, Dollar, Yen or Yuan is worth its value because of the government behind it. Informal players like Ant can upset the valuation. That is one of the challenges in this arena.
And of course, we have the bitcoin problem on untraceable funds and security.
Credit cards are so easy. Everything has an audit trail, and everyone has a limit.
Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group