Caught in the crossfire

When banks in China started pushing out credit cards a decade or so ago, there was no national credit-risk database. Bank managers sometimes hired private investigators to snoop on potential customers, asking neighbors about their spending habits and who owned their properties.  Chinese banks haven't gotten that much better at consumer credit rating. But Ant Group, which grew out of a gigantic digital payments business, has the spending records of more than 700 million Chinese citizens at its fingertips. So banks now pay Ant to identify and assess borrowers. It's a neat arrangement: Almost single-handedly, Ant has transformed lending to consumers and small enterprises in the world's second largest economy—and is helping to replicate that success in countries from India to Thailand.  This week in the New Economy India's women entrepreneurs have a strategy for pandemic survival. Zambia moves closer to default as it skips an interest payment. This top fund put Saudi Arabia on its ESG black list. Indian refiner tries to cut dependence on Middle East liquified gas. Thai protesters rally for a third day; prime minister vows to stay put.   Inside Ant Group headquarters in Hangzhou, China Photographer: Qilai Shen/Bloomberg In the new economy where data rules, Ant is the financial "queen of the colony," as The Economist put it this week. This explains why some officials in the White House apparently want to disrupt Ant's impending stock market listing in Shanghai and Hong Kong. The world's largest IPO will create a behemoth worth $280 billion, making it more valuable than any U.S. bank except JPMorgan Chase. Data wars are the new trade wars. U.S. President Donald Trump's tariffs on Chinese bicycles, laptops and other manufactured goods were merely the opening skirmishes of a deeper conflict over the world's digital future. Having tried to ban the wildly popular Chinese music video app TikTok, Trump is now going after the jewel of China's fintech industry.  Both companies deploy unrivaled data wizardry. TikTok's algorithms know which video their customers want to see before they do, and then pushes it to them, a trick that threatens the social media dominance of Facebook and other Silicon Valley giants. Ant meanwhile says it can calculate a credit score in three minutes. The difference between the two though is that TikTok has 100 million U.S. users, while Ant does almost no business in America. Michael Pompeo Nevertheless, U.S. regulators are weighing restrictions on Ant. The State Department has reportedly submitted a proposal for the Trump administration to add Ant to a trade blacklist. Secretary of State Michael Pompeo wants to purge Chinese telecommunications hardware from 5G equipment, undersea cables and the internet cloud under a "Clean Network" initiative. There's now private talk among U.S. officials of a "Clean Currency" scheme to kick Chinese companies off global payments networks, too.  Jack Ma's fintech giant already touches one billion customers worldwide through partnerships with companies like India's Paytm, giving Ant insight into the personal data of a sizable chunk of the world's population. A blockchain-based cross-border digital wallet remittance service is a platform for further global market annexation. Jack Ma Photographer: VCG/Visual China Group This isn't the first time the U.S. has sought to stymie Ma's global ambitions. In 2018, American regulators scuppered Ant's acquisition of MoneyGram, a money-transfer firm. That move blocked Ant's attempt to expand into the world's biggest financial market. By contrast, placing Ant on the official U.S. "entities" list would be largely symbolic. Ironically, the biggest obstacle to Ant's international march now may be the Chinese government, not the American one.  At home, Ant's market position is constantly threatened by meddling regulators who can't seem to decide whether its disruptive business model is a mortal threat to the state-dominated financial system or a tremendous opportunity. In a few years, Ant has taken over a vast swath of China's digital financial economy. The way to think about Ant, writes The Economist, is as a "combination of Apple Pay for offline pay, PayPal for online pay, Venmo for transfers, Mastercard for credit cards, JPMorgan Chase for consumer financing and iShares for investing, with an insurance brokerage thrown in for good measure, all in one mobile app." Abroad, however, Ant suffers (like TikTok) from its association with a country whose global image has suffered from a recent bout of aggressive diplomacy. In other words, having solved China's consumer credit-score problem, Ant may be constrained by Beijing's political-score problem. It can't do much about that. __________________________________________________________ Like Turning Points?  Subscribe to Bloomberg All Access and get much, much more. You'll receive our unmatched global news coverage and two in-depth daily newsletters, The Bloomberg Open and The Bloomberg Close. 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