Financial Technology Revolution Taking Shape

The 9th Sichuan Internet Convention was held in Chengdu late last month, with around one thousand attendees who turn up for this annual event.  The convention has also attracted some of the global leading technology companies, as well as emerging hi-tech firms from China.

The theme for this year’s convention addresses some of the hot topics including internet industrialization, cloud computing, internet finance, digital entertainment, industry trends, and innovation and entrepreneurship through internet.

Many of the intriguing technology development was revealed or shared in front of the crowd, which includes Nokia’s prediction of 50 billion objects connected via the Internet of Things in a “programmable world” by 2025. Huawei’s ambitious plan of commercializing 5G around 2020, with an already spent budget of US$ 600 million over the last 6 years, across 9 different R&D centers worldwide. EMC’s recent acquisition of Vitustrema which optimized cloud processing to 70% through their proprietary technology. University of Science & Technology of China (UESTC), the Chengdu-based academic institution and one of the top universities in China has emphasized their revised training, curriculum and approach that align with the market needs that help building the new generation of technology talents.

Regardless of the technology vision and breakthrough that has been shared amongst the market leaders, the one company that stood out, Ant Financial (AF), is the wholly own subsidiary of Alibaba, China’s leading e-commerce company.  AF provides a full range of financial services including payment, investment, and loan through their cloud computing platform, combined with big data analysis and credit assessment facility.

As part of AF’s recognition of internet finance being the new normal, they are placing their bet in building a Chinese financial ecosystem that addresses the needs of the unbanked/underbanked individuals, SMEs, and the uprising socials media gurus who live in the internet.

AF’s flagship product Alipay, the equivalent of US’s PayPal, is a payment service provider launched in 2004.  After more than a decade of growth, Alipay now provides diverse service including overdraft facility, robotic customer service, insurance and the like. They have also formed strategic partnerships with Visa and MasterCard.  With their customer base of around 300 million, and daily transaction of over 45 million, Alipay has close to half of China’s market share in the online payment domain.  Similarly, Alipay’s mobile payment version has taken off soon after its debut and soon become the leading mobile payment operator in the mainland.

Apart from revolutionizing the payment industry, AF has yet another service, YueBo (loosely translate as Balance Treasure) was launched in 2013 that allows Alipay’s customers to invest their idle funds (account balance) in a money market fund, managed by a third party asset management company.  With less than two years of its establishment the fund has grown to 724 billion Yuan (around $116b) in assets.  Most recently, a major business under making within the AF group is the new born in the family, MYbank. MYbank is one of the first batches of Internet Banks licensed by the Chinese regulator in 2014, where branchless financial services are offered online

With China’s continuous economical growth and desperate call for financial reform, internet finance has become a breath of fresh air, not only offering a new lifestyle for the young generation.  It also resolves funding challenges of small and medium enterprises, fostering new investment channels, in a developing country with the lack of financial investment vehicles and funding channels, especially for the neglected group.  This partly contributes to the equilibrium for China’s financial system. It is FinTech at its finest, in a cool way.