ByteDance’s Fintech Ambitions in Tatters Amid China Clampdown on Bigtechs

ByteDance’s Fintech Ambitions in Tatters Amid China Clampdown on Bigtechs

by September 21, 2021

TikTok’s owner ByteDance said on September 01, 2021 that it plans to scale back its fintech business and sell its securities brokerage operations amid regulatory pressure on fintech companies.

The firm did not name the business unit it intends to divest nor did it provide data about its financial services business, but report by Chinese media LatePost claims that ByteDance is planning to exit the brokerage business completely. This follows the abandonment of its long-prepared wealth management business earlier this year, the report says.

In Hong Kong, ByteDance runs Songshu Zhengquan, which translates to Squirrel Securities. Songshu Zhengquan provides financial information services, stock trading and brokerage services.

In mainland China, ByteDance operates Haitun Gupiao, which translates to Dolphin Stocks and provides stock market information and allows users to open stock trading accounts and access trading services through links provided by securities companies within the app.

Together, these two securities trading platforms are worth around RMB 500 million to RMB 1 billion (US$77–144 million), sources to LatePost. ByteDance has reportedly been in talks with investment institutions including CICC, CITIC, and Fosun Group. Two have responded with the intent to purchase these operations.

Last year, ByteDance also acquired Hong Kong brokerage Asia-Pacific Securities, renaming it as Stellar Securities, according to a report by the now-defunct Apple Daily newspaper. There was plans for a go live in early 2021.

Sources told Reuters that ByteDance has never prioritized fintech expansion but instead has focused on sectors including e-commerce and gaming as its next growth areas as it seeks to new revenue streams.

ByteDance’s fintech ambitions

ByteDance is the owner and operator of popular short-video social media app TikTok. It’s also the world’s most valued private company at US$140 billion, according to CB Insights data.

Following the lead of other Chinese bigtechs, ByteDance has been making inroads into financial services, starting in 2017 with the launch of Haitun Gupiao, or Dolphin Stocks, a report by the South China Morning Post retraces.

This was followed in 2018 by its entry into the insurance business through the acquisition of Beijing Huaxia Insurance Brokers, an in October 2019 by the launch of a lending app that lets users with consumer credit, installment payments, and credit card services.

Last year, ByteDance won an online micro-lending license in Shenzhen and obtained an online payment license through the acquisition of Wuhan Hezhong Yibao Technology, the operator of third-party payment service UIPay.

The move helped it build up its payment capabilities and culminated in January 2021 in the launch of Douyin Pay, ByteDance’s own third-party mobile payment platform for Douyin, the Chinese version of TikTok. Dou Fenqi, which translates to Dou Installments, was later added to Douyin, allowing users to pay their bills in monthly installments, Chinese media reported.

Overseas, ByteDance has contemplated Southeast Asia’s digital banking opportunity. In Singapore, it was one of the contenders for a digital banking license, and had reportedly started negotiations for a tie-up with an investment group linked to Singapore’s Lee business family in this regard.

In September 2020, sources told the Business Times that ByteDance was planning to spend several billion dollars and add hundreds of jobs in Singapore over the next three years. This was part of a larger plan to make the city-state its base for expansion in Asia after the Trump administration forced it to sell TikTok’s US assets.

China tightens regulation for fintechs

ByteDance’s partial retreat from financial services comes at a time when Beijing is tightening regulation on the country’s fintech sector over unfair competition practices and abuse of market dominance concerns.

Since H2 2020, a series of measures has been rolled out by the government to put the brakes on China’s fast-growing fintech sector, including rules on online micro-lending, requiring more restrictions on capital, licensing requirements, funding sources and business scope.

After having regulators halt its planned US$37 billion initial public offering (IPO), Ant Group has been forced to restrict its operations and embark on a massive restructuring plan that includes overhauling the group’s entire operation into a financial holding company, revamping its user data policy, and ceasing cross-selling as part of a broader anti-monopoly push.

ByteDance, which had been weighing an IPO of all or some of its businesses in the US or Hong Kong, has been forced to put on hold its intentions to list offshore earlier this year after government officials told the company to focus on addressing data security risks, sources told the Wall Street Journal in July.


Featured image: ByteDance  Shanghai Office