Big Tech companies are not the only ones facing regulation that may curb growth — the fintech sector is also coming under pressure in China and the UK.
As Ryan McMorrow and Yuan Yang in Beijing report regulators seem to be trying to turn the business model of Ant and its Alipay app on its head, after they realised the online payments and loans group had outgrown the largest state-owned banks.
From next January, Ant will have to do more business with those big banks rather than smaller regional ones that have been underwriting its loans with competitive rates, in exchange for access to Ant’s vast customer base and national reach.
The other big change, according to our #techAsia newsletter, is that
banks will be required to manage the risks incurred in joint lending. This effectively blocks a big part of Ant’s business. The company receives loan applications via smartphones and forwards them, together with its credit assessments of applicants, on to partner banks. It earns fees from the banks for providing the information on consumers.
It is a humbling for Ant’s billionaire founder Jack Ma, who derided state-owned banks as having a “pawnshop” mentality in a speech last October and then disappeared from view as Ant’s $37bn IPO was blocked by the authorities in November due to changes in “the financial technology regulatory environment”. Jamil Anderlini says interference in the private sector is likely to increase in frequency and intensity in this centenary year of the founding of the Chinese Communist party.
In the UK, the concerns of fintech regulators are about protecting consumers, not communism. The Financial Conduct Authority is planning to enforce new rules that experts say will drive up costs in an already low-margin sector. It will be held to stricter risk-management standards including, like banks, having detailed wind-down plans, reports Nicholas Megaw.
That would help consumers if businesses collapse, but place a burden on smaller start-ups. “If I was starting a payments business today I would look at e-money and think it wouldn’t be attractive . . . because the capital requirements are so much tighter,” said Nik Storonsky, chief executive of digital bank Revolut.
The Internet of (Five) Things
1. UK Budget boosts tech
The tech industry welcomed moves by the British chancellor to boost two key tax breaks for start-ups, as part of a sweeping set of measures designed to turn the UK into a “scientific superpower”. Rishi Sunak said the Treasury would consult on reforming credits for R&D and relief on employee stock options. He also promised “ambitious visa reforms”and launched a new £375m tech fund.
2. Europe’s data laws ‘already out of date’
Axel Voss, one of the fathers of the General Data Protection Regulation, told the Financial Times that it needed “some type of surgery” less than three years after it came into force. “We have to be aware that GDPR is not made for blockchain, facial or voice recognition, text and data mining [ . . . ] artificial intelligence,” said the German MEP.
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3. Facebook lifts political ad ban
Facebook will lift a ban on political advertising imposed after the US election to curb the spread of misinformation, and has pledged to investigate whether its political ads systems need a further overhaul. Advertisers would be able to resume running political ads on March 4, the social network said in a blog post on Wednesday.
4. Netflix bets big on India
The streaming service will roll out its biggest roster yet of Indian films and shows, releasing 40 local productions over the coming year as it fights for an edge over fast-growing competitors including Disney and Amazon Prime. There will be a significant increase over the $400m Netflix spent on entertainment in 2019 and 2020, said Monika Shergill, the company’s vice-president for India content. “We’re betting very, very big on India,” she said.
5. Nikola drops claims on truck weight
The tractor on Nikola’s first electric truck to enter production will weigh more than diesel-powered ones, contrary to previous claims on the company’s website. The Tre’s tractor weighs 29,800 pounds, according to magnified footage from a recent promotional video, compared to an average 17,000 pounds for diesel machines towing the trailer carrying freight.
Tech tools — DJI FPV drone
DJI, the leading consumer drone maker, has launched a first-person view drone for the first time and The Verge has reviewed it. It sounds like a VR-type experience — the DJI FPV comes with both a controller and goggles so you get “full flight immersion” and the drone’s camera is locked in a forward position. “Every FPV pilot will tell you that FPV drones are way more fun to fly. And they’d be right. The drones are more responsive in the air and they move at hair-raising speeds. They can also be much more challenging to fly,” says The Verge. They can also cost a lot more — this one is $1,299 (£1,249) with all the gear.