Technology Jan 27

China's Ant Group said to be selling US eye verification subsidiary

Reported divestment is latest controversy to hit the financial technology affiliate of Alibaba Group that was forced to cancel a huge initial public offering in 2020

China's Ant Group said to be selling its US eye verification subsidiary
Ant Group bought EyeVerify for $100 million in 2016, a purchase approved by the Committee on Foreign Investment in the US, the Washington panel that scrutinises deals for potential national security risks. File photo by Reuters.

(ATF) China's Ant Group is reportedly planning to sell its US biometric security firm EyeVerify amid growing tensions between Beijing and Washington over China's technology companies and tightening scrutiny over US data.

Ant, the financial technology affiliate of Alibaba Group, is in talks with a number of potential US buyers, Reuters reported, citing a report in the Financial Times.

The company planned to secure a sale in the first half of this year, it said. Reuters said Ant declined to comment and EyeVerify did not immediately respond to request for comment.

EyeVerify, based in Kansas City, Missouri, designs eye verification technology for mobile devices which is used by US banks including Wells Fargo.

Ant bought EyeVerify for $100 million in 2016, a purchase approved by the Committee on Foreign Investment in the US, the Washington panel that scrutinises deals for potential national security risks.

However, visual recognition software has come under more intense scrutiny, due to concerns the data could be abused. 

In December, Chinese tech giant Alibaba sought to distance itself from a facial recognition software feature devised by its cloud computing unit that could help users to identify members of the country's Muslim Uighur minority.

A senior Ant executive told the Financial Times that the company had not collected data from EyeVerify's eyeball scans. The executive said such data did not leave the smartphones that performed the scans, it reported.

LISTING REMAINS DOUBTFUL

The new Ant controversy follows the cancellation of its initial public offering Hong Kong and Shanghai in November. China's new microfinance rules make the IPO look increasingly unlikely – or that it might only happen on a much smaller scale at some unknown point in the future.

But this week, China’s central bank governor noted that there was a possibility for Ant Group to successfully list in a second IPO attempt following the high-profile pullout in early November 2020.

PBoC head Yi Gang said during a virtual session at the World Economic Forum that regulating Ant Group was "a complicated issue". However, he added: "You just follow the standard of legal structure, you will have the result," Yi said, renewing hopes of a revised offering.

Yi said that while financial innovation has been beneficial for public inclusion and lower transaction costs, there were risks to consider, such as consumer protection and misuse of monopoly power.

A potential second attempt at a listing will be faced with more investor scrutiny, and face a tougher government line to comply with antitrust rules.

The most notable concern is the risk of a breakup, which the PBoC had previously signalled as a possibility should any non-bank provider be classified as having a digital payments monopoly.

With reporting by Chris Gill and Reuters

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Ant and the battle for China's financial soul

biometric China US CFIUS US-China Ant Group Alibaba