Ant also has its own licensed small-loan subsidiaries that provide consumer-credit loans through its CreditTech platform. Loan receivables enabled and retained by these totalled 36.2 billion yuan at the end of June.
Ant says it will rely on"intelligent decisioning systems" to ensure it takes on worthy borrowers before passing them on to partners.
As asset quality gets worse and household incomes drop amid Covid-19, Ant's delinquency and default rates could climb. So while the company doesn't hold the loans itself, Ant will likely end up being a significant doorkeeper for its partner banks and trust companies, which are already laden with bad debt. Over the past six months, delinquency rates on consumer loans past due by over 30 days rose to 2.97 per cent in July from 1.76 per cent in January, after peaking at 3.
With the information available, putting a fair valuation on Ant will be difficult. The company breaks down its revenue by segments, but not at the cost or profit levels. We can only speculate that its newer digital-finance business, from online loans to wealth management, is highly lucrative, because Ant's gross and operating profit have risen.