Global financial system must include all internet banking: Jack Ma

Founder of Alibaba says the system set up after World War II is outdated and too risk-averse; he described the Basel Committee on Banking Supervision as "an old men's club" and said banks had a 'pawnshop mentality'; his remarks spurred widespread debate  

Global financial system must include internet banking: Jack Ma
Alibaba founder Jack Ma says the world's financial structures need to be rejigged. Image: Reuters. 

(ATF) China's richest man says the global system established after World War II is outdated and needs to be overhauled to incorporate the entire internet finance system and one that encourages innovation.

Speaking at the Bund Summit in Shanghai, the founder of Alibaba and highly-respected billionaire, said the current financial structures in place around the world are too risk-averse, warning that the Basel Committee on Banking Supervision is "an old men's club" which will have to deal with serious risks accumulating across the global economy. 

"Today's financial system is the legacy of the Industrial Age," Ma said. "We must set up a new one for the next generation and young people. We must reform the current system."

He also took aim at China's banks, saying they still operating with a "pawnshop" mentality, demanding collateral and guarantees before lending. But he said, that model or outlook would fail to fuel future growth.

Instead, he said a new, inclusive and universal banking system that lends to small businesses and individuals on the basis of big data should be established. 

Ma said the financial and regulatory system stifles innovation, and called for a revamp to extend financial services to more small firms and individuals on the basis of technology - an ethos that Ant Group, the giant fintech firm that he helped create, is largely based on.

In his speech, the billionaire emphasised that “innovation must pay a price and be responsible for the future." But he noted that, "to do risk-free innovation is to stifle innovation”.

Ant has an extensive payment and micro-lending business that is largely based on big data. But it has also faced rising scrutiny from regulators.

Ma, 56, who retired from Alibaba in September 2019, is now co-chair of the United Nation's High-Level Panel on Digital Cooperation. His speech aroused widespread and heated discussion in China. Some commentators felt Ma voiced thoughts others may not be prepared to say. But some felt his speech was too blunt.

Local media outlet Baijiahao hailed Ma's frequent "golden sentences", while noting that the listing of Ant Group in coming weeks is likely to transform the development of the domestic capital market.

Baijiahao said: “Jack Ma’s speech came from the true feelings of his heart. It is undeniable that Jack Ma’s speech evokes the aspirations of many entrepreneurs who dare not say such things. His words had a lot of resonance.”

Ant listing 'a miracle'

The Alibaba founder spoke also about the mammoth dual listing for Ant – set to be the world's biggest – a day after pricing was determined for its shares.

"It's the first time that the pricing of such a big listing - the largest in human history - has been determined outside New York City," he told the the audience in Shanghai, which included officials from China's regulators.

"We didn't dare to think about it five years ago, or even three years ago. But a miracle just occurred." 

He didn't give details of the pricing, which is expected to be announced next week. And that event is likely to add many billions to his already enormous wealth (more on that shortly).

Local reports on the event revealed that there is concern among investors because of the huge scale of the Ant Group's fundraising – expected to total $280 billion. Some analysts say that once it is listed, it will divert funds from other stocks.

However, investors in China said they were more worried about the final pricing of Ant – they want to see if there is enough sincerity in the operation to share actual profits to investors.

The past decade has been a time of rapid development for China. One of the most significant manifestations has been payment tools, which have undergone dramatic change. Mobile payment, which was pioneered and built up by Alipay, the core of Ant, is now dominant. The company claims more than a billion users.

Ma, the innovator, has swept away old banking payment methods, and the next decade is likely to see a new wave of traditional banking services taken over by firms like Ant Finance.

Times are changing.

Traditional banking not dead yet

Ant, which is backed by Ma's e-commerce giant Alibaba, plans to list simultaneously in Hong Kong and on Shanghai's STAR Market in the coming weeks. Sources have said the listing could be worth $35 billion, surpassing the record set by Saudi Aramco's $29.4 billion float last December.

Bloomberg has said that Ma's stake in Ant (via his 4.8% holding in Alibaba) could be worth more than $25 billion – which would put his personal wealth at close to $60 billion, according to the Hurun China Rich List.

Meanwhile, not all analysts agree with Ma's critical assessment of the domestic financial market's regulatory measures. A good number believe the relatively prudent measures adopted in recent years have greatly reduced risks in the overall financial market during this “special period” of fiscal uncertainty. The main government maxim has been "preventing risks and keeping the bottom line" – and that could well become the keynote of development over the next few years.

Despite Jack Ma’s enthusiasm, the traditional banking system will probably dominate for a bit longer. As for changes to the global financial system, that may depend on the next US president and leaders of the major central banks around the world.

We can only wait and see.

With reporting by Samuel Shen and Brenda Goh for Reuters.

# Please note: This text has been updated from the original version.

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