Ant Group Curbs Credit Limits Of Some Users Of Virtual Credit Cards

In the wake of the collapse of its initial public offering of stock (IPO), China’s Ant Group is scaling back the borrowing limits for some of the young users of Huabei. That arm of the financial technology (FinTech) giant offers a virtual credit card.

The company said that the move was an effort to promote more “rational” spending habits among users, Reuters reported. The company did not elaborate.

Ant Group is best known for its wildly popular payment and loans app Alipay, which has both online and mobile platforms. Chinese regulators are looking to strengthen the rules for FinTechs.

Ant has two credit subsidiaries, Huabei and short-term consumer loan provider Jiebei. In its IPO prospectus, Ant reported that these two were used by around 500 million people in the 12 months to June 30, said Reuters.

The canceled IPO was a big setback for Ant Group, which now faces an overall regulatory shakeup. The Chinese government’s action took place after a falling out between regulators and Alibaba billionaire Jack Ma.

Ant is the financial arm of Alibaba, which could be the world’s biggest eCommerce company.

In a November meeting, Ma reportedly told regulators that he would give portions of Ant Group to the government. According to a Wall Street Journal source, Ma said: “You can take any of the platforms Ant has, as long as the country needs it.”

Now, the future of Ant Group is up for debate. Howard Yu, director of the Swiss–based International Institute for Management Development, told PYMNTS that a restructuring may be on the horizon.

“Any FinTech disruptor, when it becomes so big, represents systemic risk,” he said. Ant’s highly profitable activities include making microloans, repackaging them and then tapping the public market to sell those loans. Yu said that this business model harkens back to the subprime mortgage model that plunged the globe into the Great Recession more than a decade ago.