There is a belief in China that Fintech is going to be larger than E-Commerce and the race is for companies to stake their claim in this new market. China has a massive emerging middle class and very little traditional banking services for consumers and small businesses. Of the 1.4 billion people in China, only about 300 million are in the national credit bureau, which means that more than a billion people have no credit profile. Hundreds of millions of Chinese “unbanked” consumers are middle class, have high discretionary income, and would be considered prime or super prime borrowers. On top of that, the large Chinese banks have no history in making consumer and small business loans and were never designed for that purpose (they make infrastructure and commercial real estate loans).
This huge void in the market has been identified by virtually every major Chinese company that has a business-to-consumer (B2C) relationship. If a firm has data on a large sample set of consumers, then they have a unique proprietary edge from which to assess the creditworthiness of those unbanked consumers. We are seeing the leading Chinese companies from a diverse set of industries muscle their way into the fintech sector. This article highlights some of the key players that have made the horizontal jump into fintech.
Ant Financial Services Group is owned by Alibaba Group, the largest e-commerce firm in the world. Ant Financial is focused on serving small and micro enterprises as well as consumers. With the vision “to turn trust into wealth,” Ant Financial is dedicated to building an open ecosystem of Internet thinking and technologies while working with other financial institutions to support the future financial needs of society. Businesses operated by Ant Financial Services Group include Alipay for payments, Yu’e Bao for money market services, Ant Fortune for wealth management, Ant Check Later and Ant Micro Loans for financing, Zhima Credit (formerly Sesame Credit) for credit reference, Zhao Cai Bao for online lending, and MYBank for small business lending. Ant Financial is the largest fintech company in the world.
JD Finance Group operates seven lines of business: supply chain finance, consumer finance, crowdfunding, wealth management, payment services, insurance and securities trading. JingBaobei is their microlending platform and Baitiao is their crowdfunding platform. Jintiao and Xiaobai are their wealth management businesses. Through their access to transactions and credit management systems the companies provide financial services to enterprises and consumers.
Baidu Jinrong is the financial services arm of Baidu Corporation that was formed in 2015. Baidu operates the second largest search engine worldwide behind Google. Baidu Jinrong is focused on many different verticals under different brands including consumer finance (Baidu Umoney), wealth and fund management (8 Baidu), payments (Baidu Wallet) and financial asset transaction platform services. Through joint ventures the company also does business in internet banking and insurance.
Greenland Group (Stock Code: 337.HK) is one of the world’s largest publicly traded real estate development companies with more than 15 million clients. They are the largest Chinese developer in the US. Greenland Financial was formed in December 2015 and it includes three main business sectors: an online wealth management platform for individual investors; a professional asset allocation and wealth management service for middle-class clients; and a cloud platform to provide internet technology and data analysis services. With more than 500,000 registered users, the online wealth management platform has seen its transaction volume approach 20 billion yuan ($2.94 billion). The middle class wealth management service manages more than 5 billion yuan ($720 million) in assets and sells mostly bond-type real estate wealth management products.
Wanda Internet Finance Group leverages Wanda’s offline commercial platform to form a business division comprising of four activities: data application, credit service, online lending and payment, and creating an innovative financial offline-to-online model. By 2020, Wanda Internet Finance plans to reach 5,000 shopping malls, 2 million merchants, 700 million consumers, and issue 500 million cards with a credit balance of RMB 1 trillion nationwide. Wanda’s “Ffan” app offers rewards points, retail privileges, credit card and wealth management services. Its micro loan business is designed to extend loans to Wanda Plaza merchants and their customers. Wanda also leverages its retailer and consumer data to offer a suite of credit services including credit checks, credit reports, credit evaluation, and credit ratings.
Lufax Holdings is one of the world’s largest and most successful fintech firms. It is owned by Chinese insurance giant Ping An Group. The business consists of three divisions: Shanghai Lujiazui International Financial Assets Commodity Exchange Co (Lufax), Shenzhen Qianhai Financial Asset Exchange Company Ltd (QEX), and Puhui Financial. Lufax offers wealth management and insurance services to its 23 million registered users, QEX focuses on institutional business and cross-border business, and Puhui Financial provides loans to consumers and micro-businesses. Lufax Holdings was valued at $18.5 billion at its last round of funding and it has been eyeing a Hong Kong IPO. As part of their wealth management business, the company announced plans in December, 2016 to launch a platform in 2017 which would allow Chinese investors to access markets around the world.
Zhong An is China’s first Internet-based insurance company utilizing Big Data analytics. Founded in 2013, the company is backed by Alibaba, Tencent, and Ping An Group and has rapidly grown in size and scale. Zhong An wants to help with the needs of data mining and product design, automatic underwriting, auto claims, precision marketing and risk management for insurance. Zhong An’s primary form of insurance is a return-delivery insurance product for buyers on Taobao.com. ZhongAn completed a venture round valuing the company at $8 billion in June 2015 and is rumored to be seeking a public offering. In November, 2016 the company announced a new arm called ZhongAn Information and Technology Services to further explore technology for ZhongAn such as AI and blockchain.
Social Networking & Gaming:
Best known as a social network and gaming company, Tencent Holdings Limited is a Chinese investment holding company whose subsidiaries provide media, entertainment, internet and mobile phone value-added services and operate online advertising services in China. Tencent has recently created Tencent FiT (Financial Technology Group), which includes TenPay (payments), WeChat Pay, Mobile QQ Wallet, Tencent Credit Services, and Tencent Licaitong, its money market fund and wealth management platform.
Tencent also launched WeBank, the first online-only bank in China, a joint venture that also includes Shenzhen Baiyeyuan Investment and Shenzhen Li Ye Group. While it has not yet been approved to begin taking deposits, WeBank’s current products include investment products such as money-market funds, as well as a personal loan service called Weilidai, which lets creditworthy users borrow up to 200,000 yuan (US$32,000) without providing a guarantee or collateral. The service is available 24/7 via QQ wallet and allows users to borrow and repay the money anytime with a daily interest of around 0.05%. The transaction can be processed within 15 minutes.
Since Wealth is Sina Media Group’s internet finance group. SinaPay is a social payments solution. Weiquanbao is a social wallet focused on mobile payments. Weicaifu is their Internet financial services company with a focus on personal financial management.
Phoenix Finance is an online platform, established by Phoenix Satellite Television Holdings, to provide intelligent financial services for Chinese investors worldwide. Phoenix Finance has partnered with industry-leading financial institutions like Citic and China Mobile, to offer unique high quality financial products. Their average loan size is $10m USD and can go up to over $100m. Their average customer is over 30 years old and is considered mass affluent or a high net worth investor and they have over 2.6m registered accounts.
These Companies Represent the Future of Chinese Fintech
The bottom line is that the market opportunity is huge and many large players with deep pockets have moved in. We often hear dramatic headlines like “regulators warn that 90% of peer-to-peer lenders will fail in China,” which could be the case, but those companies are mostly micro businesses. What is far less reported is that many of the largest players in the Chinese Internet Finance market are not startups but rather divisions of huge companies that have invested heavily in compliance and infrastructure and are here to stay. These companies will dominate the market along with a handful of the top tier pure plays.
These are the types of companies that we feature at our Chinese event. We encourage you to come to Lang Di Fintech in Shanghai to meet the largest fintech players in the largest fintech market.