Fintech, Data Mining, and the Future of Autocracy
In early November of 2020, Jack Ma was scrambling. Ma, one of China’s richest men, was in the process of completing the world’s biggest IPO, taking Ant Group, the financial services and technology arm of his behemoth conglomerate Alibaba, public. However, as Ant set out to raise around $37 billion. Chinese regulators swiftly took notice, blocking the company’s IPO based on concerns over its business model, and leaving Ant Group dead in the water. These actions by financial regulators led to a meeting on November 2nd between Ma and Chinese officials, during which time Ma offered to hand over parts of Ant Group to the government in an attempt to placate them.
Ma’s attempts to smooth things over with Chinese officials did not go as planned, and regulators continued to challenge Ant Group’s IPO, primarily driven by a desire to access the company’s troves of consumer financial data. Ant Group’s assets include Alipay, China’s largest digital payment platform, and the company has made an increasing number of growth investments in smaller Chinese tech startups, allowing it to collect swathes of valuable financial data and consumer information. Megvii, a facial recognition platform backed by Ant Group, was found to be a technology provider to China’s Integrated Joint Operations Platform, a police app allegedly used to collect detailed data from the Uyghur minority in China’s far western province of Xinjiang, according to a 2019 report by Human Rights Watch. While Megvii denied any links to the IJOP database in a Bloomberg report, questions remain regarding the company's complicity in helping to facilitate government surveillance programs in China.
Ant Group also operates Zhima Credit, previously known as Sesame Credit, a private credit scoring service that uses a variety of customer data mined through Alibaba’s services to calculate consumer credit scores. Through their Zhima credit platform, Ant Group can access the personal data of over one billion Alipay users and can harness large amounts of data to examine payment demographics and calculate credit scores. Although Zhima Credit has access to this pool of data, they have been reluctant to share their findings with the Chinese Government. Despite initially working as a technology partner of China’s expanding Social Credit System, Zhima Credit's general manager, Hu Tao, stated that no Zhima Credit data is shared with the Chinese government or other third parties without a user's consent in 2017, likely an additional reason for China’s halt of the Ant Group IPO.
As the financial technology sector continues to grow, similar conflicts of interest between states and private companies will likely occur. In the case of Ant Group, despite access to portions of the company’s data, Chinese regulators were concerned by the lack of user information they received on the firm’s behalf. China’s pervasive state surveillance apparatus has been widely reported, and it is hardly surprising that regulators demanded more information from the company, likely hoping to expand the government’s extensive cache of digital surveillance assets. However, while the case of Ant Group makes sense within the context of the Chinese state, the growth of Fintech across the globe has piqued government interest worldwide.
In India, for example, payment service PayTM has faced increasing government intervention. PayTM, whose stakeholders include SoftBank and the aforementioned Ant Group, was previously accused of sharing user data with the Indian government in 2018. This data sharing allegedly resulted in government monitoring of PayTM users in the hotbed regions of Jammu and Kashmir. While PayTM denied the allegations, several news outlets published evidence of close ties between Vijay Shekhar Sharma, PayTM’s CEO, and India’s ruling Bharatiya Janata Party (BJP). While Indian users of the PayTM were left in shock after the alleged data breach, the news is hardly surprising. As various governments across the globe look to increase control over their constituents, they are more frequently turning to private enterprises to support their aims, leveraging vast amounts of consumer data to conduct surveillance operations.
In turn, the financial technology sector continues to grow globally, with a predicted annual growth rate of around 25% and an estimated market value of around $309 billion by 2022. In much of the Global South, fintech has helped to expand financial access substantially, as various mobile payment services can be utilised by a vast number of people without previous access to formal financial institutions. Western interests have taken note of this fact. Online payment platforms such as SoFi and Ayden have been expanding their operations internationally. As recently as April of last year, SoFi announced its acquisition of Hong Kong-based 8 Securities.
Whilst the growth of the financial technology sector has helped to create jobs and improve financial literacy, the structures behind this growth are not incorruptible. Governments and private companies are frequently facing overlaps in the scope of their aims, and in the Global South, the barriers for entry to the fintech marketplace can often mean that ordinary citizens bear the brunt of the problems. As business leaders like Jack Ma face increasing pressure from state actors to give up privacy measures in exchange for growth, they must be willing to consider the dangerous cost of ensuring profitability.
Image courtesy of Andrey Belenko ©2009, some rights reserved.
