Commentary on Political Economy

Tuesday 26 January 2021


Ant plans sale of prized US asset as user data scrutiny intensifies

Ant Group has attempted to expand its footprint in the US as it faces fierce domestic competition from Chinese rival Tencent in recent years © Bloomberg

Ant Group, the digital payments arm of Chinese ecommerce group Alibaba, is planning to sell its prized US asset amid heightened tensions between Beijing and Washington over China’s fast-growing technology sector and tightening scrutiny over US user data.

The planned sale of EyeVerify, a biometric security firm based in Kansas City, Missouri, also comes as Ant looks to raise capital in anticipation of potential fines and restructuring costs following its aborted IPO last year.

Ant bought EyeVerify for about $100m in 2016, in a deal that was cleared by the Committee on Foreign Investment in the US, marking its first investment in a US company.

The company, whose technology is used by banks including Wells Fargo, scans users faces as a password for mobile services. It is currently a subsidiary of Ant-owned Zoloz Global.

Ant has spoken with a number of potential acquirers in the US, according to two people familiar with the matter. One of the people said Ant was planned to secure a sale in the first half of this year. Ant declined to comment.

The Trump administration increased its scrutiny last year of Chinese companies that handle the private data of US citizens, in particular the mobile apps TikTok and WeChat.

“EyeVerify was being targeted by some in the previous administration as a source of data security concern,” said Roger Robinson, chief executive of RWR Advisory Group, a research and risk consultancy based in Washington. “Moving to protect the personal data of Americans will probably continue under President [Joe] Biden for both political and security reasons.”

A senior Ant executive, who declined to be identified, said in a previous conversation that his company had not collected data from EyeVerify’s scans. He said such data did not leave the smartphones that performed the scans, meaning that neither EyeVerify nor Ant had access to the data.

Ant has attempted to expand its footprint in the US under domestic competition from Chinese rival Tencent. But a $1.2bn deal to acquire Texas-based money transfer company MoneyGram International was blocked by US regulators over national security concerns in 2018. About 5 per cent of Ant’s business is outside China.

In China, regulators suspended Ant’s dual listing in Hong Kong and Shanghai, which had been set to become the world’s largest-ever share offering, days before its launch in November.

Ant has dominated mobile payments in China through its Alipay app. However, Beijing has drawn up regulatory changes for financial technology companies that are expected to drastically restrict Ant’s business.

Alibaba is in talks to raise up to $8bn in a bond issuance early this year to provide liquidity to expand outside of China and to pay costs associated with its regulatory issues.

However, the debt sale, which was initially planned for early January, has not yet been formally marketed to investors. This has prompted speculation about whether it will go ahead while Jack Ma, Ant’s founder and largest shareholder, remains largely out of the public spotlight. 

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