By Jacky Wong

Chinese fintech giants are coming to market. The country's online finance scene has shifted rapidly from the Wild West of just a few years ago: But having conquered smaller rivals and evolved around skeptical Chinese regulators, these new finance heavyweights face a new and different set of risks.

Ant Group, the finance affiliate of Alibaba, could raise more than $30 billion in concurrent Shanghai and Hong Kong share sales, making it the largest initial public offering ever globally. Another fintech company Lufax, backed by China's largest insurer Ping An Insurance, is planning to raise about $3 billion in a New York IPO. JD Digits, controlled by Alibaba's e-commerce rival JD.com, has also filed to list in Shanghai.

These companies are thriving thanks to surging demand for financial services online in China but they have also been adapting themselves to the shifting regulatory landscape. Take Ant as an example: the company has used its massive user base in digital payments -- 711 million as of June -- to make forays into financial products like consumer loans and investments. Initially, the company lent money from its book and managed its in-house money-market fund Yu'e Bao, which had $270 billion of assets at its peak in 2018. But tighter regulations have driven Ant to act more as a mere platform to sell products provided by other financial institutions.

There is a similar story for Lufax. The company used to be one of the largest peer-to-peer platforms in China, but the government started to crack down on the booming market, which has also bred many frauds and scandals. As of the end of last year, there were only 343 P2P platforms in China, a 90% drop from the peak in 2015. Lufax itself has stopped offering P2P products since last year.

Lufax likewise has scaled back its microloans and consumer finance businesses as new regulations in late 2017 mean it is now more difficult for the company to securitize its loans as asset-backed securities. Faced with regulatory setbacks, the company, with the help of Ping An's customer network, has pivoted to become a platform for financial products from loans to mutual funds. Almost all of the new loans made on its platform this year were funded by third-party banks or trusts, compared with 19% three years ago.

Regulations have driven these fintech giants to focus on their technology edge -- for example Ant could use spending patterns data on its Alipay app to gauge a person's creditworthiness -- rather than becoming just another behemoth financial institution. But that doesn't mean immunity from policy risks. Market concentration could still irk Beijing. Financial products that could bring systemic risk to China's financial systems will still be curtailed. Their size may also draw new risk: The U.S. State Department, for example, has proposed putting Ant onto the entity list according to a person familiar with the matter, potentially dealing a blow to its overseas ambitions.

China's fintech industry is maturing, and the winners are ready to capitalize on their success in the stock market. But size and success brings its own risks for Chinese technology and finance companies these days -- regulatory risks, both at home and abroad, have changed but by no means gone away.

Write to Jacky Wong at JACKY.WONG@wsj.com

(END) Dow Jones Newswires

10-16-20 0925ET