Kapito says Asian tech companies pose disruptive threat to west’s financial services sector
BlackRock co-founder Robert Kapito has warned that the Western financial services industry is risking complacency over the disruptive threat posed by large Asian tech companies such as Ant Financial, which is expected to be valued at $150bn in its latest fundraising.
The president of BlackRock, the world’s largest asset manager, said he was “shocked” at the potential valuation of Ant Financial, which is the payments affiliate of ecommerce group Alibaba and has captured just over 50 per cent of the $16tn Chinese mobile payments market.
Chinese tech companies are moving to compete with established financial services providers, who are likely to struggle to match the new entrants’ financial muscle and technological firepower, Mr Kapito said.
“This is a story that I do not think ends very well,” for established western financial companies, added Mr Kapito, who was speaking on Friday at an event for UBS wealth advisers in Davos, Switzerland.
“Tech companies are going to enter the financial services market in a very, very aggressive way”
—-Robert Kapito, president of BlackRock
“Apple was not in the music industry, Google was not in the mobile phone industry and Amazon was not in the groceries business — until they were,” he said. “Tech companies are going to enter the financial services market in a very, very aggressive way.”
Ant Financial’s sprawling portfolio of businesses includes one of the world’s biggest credit scoring systems, a bank, an insurer and a lending platform for small businesses. It was reported last week by the FT and other news organisations that Ant Financial is seeking to raise at least $9bn in its latest private fundraising ahead of an initial public offering.
The $150bn valuation would be more than double the $60bn Ant Financial secured in its last fundraising in April 2016, underlining how the company has grown as China moves at pace to a cashless economy.
Investors are valuing Ant Financial, and its domestic rival Tencent, so highly in part because of their potential to disrupt more of the financial services industry, Mr Kapito said. BlackRock, which manages $6.3tn for investors, has a market capitalisation of $85bn.
Last week Larry Fink, BlackRock’s chief executive, told shareholders in his annual letter that the Chinese market had become a top priority for the fund management behemoth. China’s asset management industry is expected to grow to $7.5tn by 2025 and be the world’s second largest, behind the US.
Mr Kapito’s concern was echoed by Andrew Formica, co-chief executive of Janus Henderson, the fund management group with $370bn of assets.
“You have to expect there will be a threat from [Chinese] technology companies to financial services,” Mr Formica, who was also at the Davos event, told the FT. “But I would say Amazon is equally a threat to doing that.”
Source: The Financial Times
