Ant Group: Jack Ma’s money supermarket is the ‘crown jewel’ of China’s internet
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“Ant Group really is the crown jewel of Jack Ma and … of China’s internet industry,” said Edith Yeung, general partner at Race Capital.
It is one of the biggest technology firms in the world and the biggest online payments platform in China. The app has established its presence in every aspect of financial life in China, from investment accounts and micro savings products to insurance, credit scores and even dating profiles.
Ma tasked Alibaba’s finance team to create Alipay. The service would act as a trusted third party, holding money from buyers in escrow and only releasing it to sellers after the goods had been received and buyers confirmed they were happy with what they got.
“I said I don’t care if this model is scientific, whether it’s fancy-looking, or not. As long as it works, it helps [to] build up the trust,” he said.
Money supermarket
The app also connects millions of people to a ton of financial services. Alipay users can browse and select insurance products, pay bills, get loans, pay staff and invest in money markets.
Yeung compares it to “a financial supermarket.”
“Anything you want to do in financial markets” you can do through Alipay, she said.
Ant now offers so many financial services and products that it “has become part of the everyday life of hundreds of millions of individuals and businesses across China,” said Zennon Kapron, founder of financial technology consulting and research firm Kapronasia.
“It’s very difficult to overstate the impact the company has had on Chinese individuals,” he added.
One of the most popular services is Yu’e Bao, a wealth management product launched in 2013 that allows users to invest money left over in their digital wallets. The minimum amount to invest is just 1 yuan (15 cents).
At the time, most wealth management products offered by traditional banks required minimum investments of 50,000 yuan ($7,300), according to the newspaper. It lauded Yu’e Bao as “an instant hit, especially among young people whose driblet savings are largely ignored by banks.”
At its peak in March 2018, Yu’e Bao’s assets under management topped 1.69 trillion yuan (about $267 billion at the time), according to Fitch Ratings. Chinese regulators have subsequently forced Yu’e Bao to shed assets over concerns about systemic risk — if the massive fund failed for some reason, it could wreak havoc on China’s economy. But it remains China’s largest money market fund with 1.26 trillion yuan ($184 billion) as of March this year, according to Fitch Ratings.
The Alipay and Ant ecosystem has allowed many individuals and small merchants “to borrow money, accept payments online, to really provide economic empowerment for themselves, for their workers and their families,” said Kapron.
Huge trove of data
With hundreds of millions of people tapping into its financial products, Ant has access to incredibly valuable data on Chinese consumer behavior.
Unlike the United States, China doesn’t have a reliable credit scoring system. In 2015, Ant launched Sesame Credit to fill the gap. The company describes Sesame Credit as a “trust score,” a way for businesses and consumers to assess people’s willingness and ability to pay for goods or book services. It is the country’s largest credit rating system, according to Yeung, of Race Capital.
But it is used for much more than just getting preferential loan rates. “I actually have seen the Sesame score used for online dating. You can actually choose for your credit score to be displayed in your dating profile,” said Yeung.
Sesame scores are also shared on Chinese social media platforms by people who want to show off their purchasing power.
Social shaming aside, Chinese internet users are growing increasingly uncomfortable with how much data is being hoovered up by big tech firms, and they are keeping an eye on what Ant is accessing.
In 2018, the company apologized for misleading Alipay users in an effort to expand Sesame Credit’s user base.
Going all in on tech
Earlier this year, the firm changed its name from Ant Financial to Ant Group because it is “reinventing itself” as a provider of tech services to other financial companies, according Sunny Tian, a researcher with market research firm R3.
In the past, Ant offered loans, investments, or insurance products directly to consumers and companies. In recent years, however, Ant has turned itself into a platform that charges banks and insurers fees to connect them with potential customers, Tian wrote in a report this month.
Ant’s lending platform, for example, offers a “three-one-zero” service — three minutes to apply, one second to get a credit decision, and zero people involved in the decision — but the loan is syndicated out to a mainstream bank. The debt sits on the bank’s books, with Ant taking a fee, according to Tian.
“This moves Ant off the path of becoming a replacement to mainstream finance companies, enabling it to return to its roots as a less capital-intensive technology business,” she said.
Ant has also launched Bangnitou, an AI-powered investment advisory service through a joint venture with Vanguard. Bangnitou, which translates to “help you invest,” applies algorithms that automatically reallocate investment portfolios. The minimum investment is 800 yuan ($118). In a little over three months after its April launch, Bangnitou had attracted approximately 200,000 new customers.
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