Online Conference: The Rise of China's Tech Industry

Online Tech Conference: The Unicorns with the Dragon Tattoo

Online Conference: The Rise of China's Tech Industry


Online Tech Conference: The Unicorns with the Dragon Tattoo

The Rise of China's Tech Industry

This is an unprecedented online conference different from any other conferences that you have attended.

Instead of a typical 3-day conference with many stages and sessions that you might miss out on, this conference will be held consecutively for 11 days online from July 15 - 30, 2019. You will get two to three speakers every day following a carefully-curated agenda. Talks are held live online and you will get a copy of the recording later to ensure you don't miss out anything.

Learn from industry experts

With 21% of the world's internet population, China has fostered 9 out of the top 20 global internet players by market cap, 186 unicorns, USD$40T+ mobile transaction value, 35% mobile payment adoption, USD$1T+ e-commerce GMV, as well as super apps like WeChat, Alipay, Meituan etc. with huge user base.

Given the domestic success, China's unicorns are expanding to global markets through direct product development, acquisition or partnerships.

The power has awakened.

Hear the thoughts from China's tech executives and learn about the influence, implication, and inspiration on the rise of China with exclusive content, live Q&A, and amazing networking opportunities in the China tech community.

The first 100 participants will get surprising gifts! Click HERE to learn more and sign up!

Ant Financial's mutual aid platform adds 26 million users in fewer than 3 months

Users of Ant Financial's mutual insurance product have surged by around half to 76 million over the last three months while funding has been provided for 597 critically ill users, the Hangzhou-based firm said on Monday.

Why it matters: The product is a disruptor for the traditional insurance industry as it lets users share payments for seriously sick individuals. The low payments and high compensation are shaking the business models of traditional players.

  • Each user paid RMB 0.51 (around $ 0.074) in late June, according to the latest data. The services has attracted low-income individuals who had never considered traditional insurance before.
  • In China, the term "returning to poverty due to illness" is used to describe middle class individuals who run out of assets when paying for treatment due to a lack of full insurance coverage. It is especially common in rural areas, where many of Xianghubao's users are located.
  • The product covers 100 critical illnesses with a maximum compensation of RMB 300,000 and plugs a gap not covered by the government and traditional insurers so far.

"Xianghubao and insurers are not competitors, we are educating people about risk management and popularize insurance services."

—Ant Financial Vice-President Yin Ming

Details: Launched less than a year ago, Xianghubao has attracted a great number of users especially in tier-three cities, small towns and villages. However, the product is loss-making.

  • Over half of users are from tier three cities and 32% users are from small towns or villages, according to 36 Kr.
  • Ant did not consider making a profit from the product, but will cut costs by "technical methods" in order to strike a balance, said Yi Ming, vice-president of Ant Financial, who oversees the product.

Context: Launched in October, Xianghubao hit 10 million users in less than a week.  Alipay users who pass a credit evaluation can join the program.

  • Average fees are shared by all members and they pay in between RMB 0.1 to RMB 0.5 twice per month.
  • Xianghubao charges an 8% premium for each time compensation is paid out, which is lower than the 40% average from traditional non-life insurers and 20% from personal insurers.

The financial services industry is the next great frontier for open source

Code from Ant Financial's open source SOFAstack project, seen on Github (Image credit: Technode)

Open source software is a driver of the democratization of technology, opening doors, and leveling the playing field for many industries. However, financial services has been a rare exception: financial institutions have tended to rely on their own technology development and operation.

In a sector that has traditionally served the few and not the many, open source could be the key to make financial services more inclusive for the 2 billion people and 200 million small businesses around the world lacking access to basic services such as banking and lending.

In a report published by Gartner, global enterprise IT spending in the banking and securities market was estimated to have grown by 4.6% in 2018 in constant US dollars. Banking and securities firms remain steadfast as they continue to prioritize digital transformation. But it has largely been major global banks that have the resources and ability to throw their hats into the ring of technology development—smaller regional banks have tended to stay on the sidelines.

Smaller banks, such as those based in developing countries and rural regions, lack technical expertise and have trouble affording the capital expenditure needed for modern IT infrastructure, such as next-generation databases, advanced distributed computing architecture and financial-grade artificial intelligence. However, if they gain confidence to tap lower-cost and more collaborative open source innovations, they will be able to serve their markets better.

A promising step in this direction is growing participation in the Fintech Open Source Foundation. Members include ten of the 30 biggest US banks by assets under management, including Goldman Sachs and JPMorgan.

For the same reasons, Ant Financial’s Alipay has joined the Cloud Native Computing Foundation as a Gold Member, hosting critical components of cloud native software stacks, including Kubernetes and Prometheus. By sharing our technical knowledge with the Silicon Valley-based CNCF, a leading open source organization under the Linux Foundation, and our fellow members, Alipay is committing to contributing and opening its technology to financial institutions and partners across the globe, while working with many regional and rural banks in China, to help their digital transformation through the products based on readily available open source technologies.

Alipay was founded in 2004 as a safe and trustworthy service to facilitate payments during a time when there was no such option in China. It has since evolved and scaled to provide millions of small and micro businesses with a variety of services, including payments, microloans, and insurance, among others.

We have already brought technology benefits to the industry, creating efficiencies, and lowering costs at more than 200 financial institutions, including more than 100 banks, over 60 insurance companies, and more than 40 asset management firms and security brokers across China.

From years of experience serving mission critical financial applications like Alipay, we have created various open source projects such as Ant Design, a popular UI design language, and Scalable Open Financial Architecture Stack (SOFAStack), which plays a critical role in enabling customers to participate in the 11.11 Global Shopping Festival, the world’s largest shopping festival by transaction volume.

With SOFAStack, businesses large and small are able to leverage the scale and reliability of Alipay’s payments platform so they can focus on serving their own customers on the busy shopping day.

By making SOFAStack open source, we have enabled partners, such as the Bank of Nanjing, to build their own robust technology systems. The Bank of Nanjing recently built a next generation core banking system known as Xinyun Plus for itself and its third-party partners, with the help of SOFAStack and other open source technology from Alipay.

With its high performance, flexible scalability, strong consistency, and disaster recovery capabilities, Xinyun Plus signed up nearly 10 million new customers by the end of 2018, including small and medium-sized enterprises, with its daily capacity to process loan applications increasing tenfold from 100,000 to 1 million. The bank was also able to speed up the review process for loan applications, with some customers receiving approval in less than one second. The management cost for a single account fell by 80 to 90%.

Benefitting from open source technologies, Xinyun Plus brings customers better user experiences while accelerating technology iteration and innovation.

Last year, open source software celebrated its 20th anniversary. For its next ten years, the newest and most crucial application of open source may lie in transforming financial services to make them more accessible for people around the world.

Ant Financial and our open source projects are excited to be part of this global technology community, and we hope it will bring more equal opportunities to the world.

P2P lender Dianrong raises new capital amid tightening regulations

Chinese P2P lender Dianrong announced Thursday that it has raised new capital in a funding round led by Standard Chartered Private Equity (SCPE).

Affirma Capital, a private equity firm spinout of SCPE, and Dianrong’s existing shareholders including ORIX-backed Dalian Financial Industry Investment Group (DFIIG) also participated in the round, according to a company statement sent to TechNode.

The Shanghai-based online lender did not disclose the amount raised in the new round. However, in April, it was reported that the company was seeking to raise $100 million in a new round of funding. Guo Yuhang, the company’s co-founder, revealed at the time that he put $10 million of his own money into the company at the end of December to help the company weather the regulatory storm.

The new capital will be used to boost the company’s registered capital and develop new business models, a company spokeswoman told TechNode. Dianrong will adjust its business structure as it shifts its focus from offline to online, she added. The company will also increase its registered capital from the current RMB 300 million ($43.81 million) to the minimum RMB 500 million required by regulators. The new registered capital requirement set by Chinese regulators is part of a pilot program to register the country's surviving P2P lending platforms in a national monitoring system, which could be rolled out in the second half this year.

“The internet finance industry is currently undergoing a reshuffle,” Guo said in the statement. “In the face of constant market and regulatory changes, our directors are constantly adapting to the new regulations and tweaking the company’s development strategy,” he added.

In March, Dianrong announced that it was shuttering 60 of its 90 brick-and-mortar outlets and laying off as many as 2,000 employees. At the time, Guo blamed the company’s slowing growth in the past two years on the changing regulatory environment and unclear policies.

The company's last completed funding round was in August, in which it raised $40 million from DFIIG.

China’s P2P lending sector had been growing nearly unregulated for years before authorities began implementing clear rules. The clampdown on fraudulent and risky financial practices began in 2016, which decimated the industry, forcing the closure of more than half of the P2P lending platforms in the country.

Chinese P2P lending platforms look to Southeast Asia amid industry purge back home

New Dehli, India (Image credit: Annie Spratt)

A slew of Chinese fintech and peer-to-peer (P2P) lending platforms are looking to more lenient markets in Southeast Asia (SEA), following a prolonged industry crackdown in China that has left the sector reeling.

Over the past year, China’s regulatory clampdown on risky financial practices has wiped out more than half of the country’s P2P lending platforms. As of May, just 900 survived, down from almost 1,900 recorded a year ago.

Many surviving platforms have decided to cut their losses and exit the space rather than attempt to comply with increasingly strict oversight. Some, however, have decided to explore neighboring markets including India, Indonesia, and Vietnam, looking for their next cash cow.

Southeast Asia is home to credit-hungry consumers who are typically left underserved as a result of limited access to loans and regulations that lack clarity. These conditions provide both an opportunity and a challenge to Chinese firms hoping to do business in the region.

“China's P2P lending industry has gotten much more strictly regulated,” Johan Uddman, fintech consulting partner at Shanghai-based think tank Den Digitala Draken, told TechNode. For Chinese P2P lending platforms, it makes sense to look at markets where growth is just starting to take off, bringing their technology, know-how, and capital.

Expanding abroad

In early June, Indian daily newspaper the Economic Times reported that Chinese fintech companies, including WeShare, 9F Group, and CashBUS, are exploring investment opportunities in the country’s burgeoning online lending sector, particularly in the P2P lending space.

The Indian market, like China, is credit-starved, said Bhuvan Rustagi, co-founder & chief operating officer of Delhi-based P2P lending platform Lendbox. The country also has a largely untapped retail investor base, from which lenders could potentially pool their funds.

"These are opportunities in which any Chinese player that already has experience in handling high volume and a high growth market can take advantage of," Rustagi said.

The rise P2P lending in Southeast Asia bears resemblance to the same surge that took place in China starting in 2011. A fast-growing economy coupled with a rapidly expanding tech-savvy user base accelerated fintech adoption in these markets.

Meanwhile, a lack of access to formal financial services has necessitated the rise of informal lending platforms.

India matched China in fintech adoption in 2019, reaching 87% and surpassing the global average of 64%, according to Ernst & Young’s Global Fintech Adoption Index. The report’s findings were based on a survey involving digitally active consumers and enterprise fintech users around the world.

There are some companies from China interested in investing in Indian lending platforms or setting up their own platforms that choose to stay put at the moment because the market is still young, and they rather wait for more regulatory clarity in the space, said Rustagi.

Chinese companies are currently entering the Indian market through acquisitions rather than setting up their own operations. However, Rustagi said he has noticed increasing communication between Chinese companies and P2P lenders in India on investment, joint ventures, and acquisition opportunities.

Nascent markets like India for Chinese P2P lenders may seem like a new haven where opportunities abound, but potential hurdles abound in the Indian market.

The country’s P2P lending regulations are “more proactive than reactive” compared to China, Rustagi said. The Reserve Bank of India, the country’s central bank, is reasonably receptive to stakeholders’ feedback, although it has taken a more conservative approach towards P2P lending, he added.

There are other issues as well. For example, most consumers in India lack sufficient credit information like their counterparts in China, so new players entering the market will have to devise some “unconventional ways” to conduct risk assessments on borrowers, said Rustagi.

What’s happening in India is also happening in other Southeast Asian countries. In Indonesia, there has been a noticeable increase in the number of Chinese lending platforms, alarming the country’s regulators.

Many business practices that Chinese companies have adopted are deemed to be “moral hazards,” said Benedicto Haryono, CEO and co-founder of P2P lending platform KoinWorks.

For example, some of the data mining and data collection methods used by Chinese fintech companies are illegal in Indonesia. Many recently implemented regulations came as a reaction to this, aiming to set straight business practices in the country’s lending space, Haryono said.

The Financial Services Authority of Indonesia (OJK) said last year that had it blocked and warned around 500 websites and mobile applications run by illegal P2P lending services, according to the Nikkei Asian Review. The OJK reportedly received thousands of complaints about the platforms. Grievances ranged from intimidation and sexual harassment during debt collections to violation of data privacy and poor loan payments record keeping.

Indonesian officials said illegal players that come from abroad, including China, are harder to control.

Such a large, untapped market has attracted many platforms hoping to make a quick buck, Haryono said. However, most are underfunded and soon realize making an entrance is not as easy as they thought. Some better-funded early players, like Alibaba-backed fintech firm Akulaku, are thriving in the market, he said.

In Indonesia, a lot of Chinese fintech companies that have set up marketplace lending operations have adopted a balance-sheet lending model, in which lending platforms retain loans on their books, instead of selling to other financial institutions or individual investors at a discount, said Haryono.

Regulators are more lenient towards lenders that take on the financial risk and don't tap into the public’s money than those that operate P2P platforms.

Signs of trouble?

Similar to India and Indonesia, Vietnam's online lending sector is on the cusp of taking off. The Vietnamese government was mulling over a decision to legalize P2P lending earlier this year. In March, the government announced that it would soon allow a pilot program for P2P lending before developing a regulatory framework for the sector.

An influx of international players from countries including Singapore and Indonesia is beginning to crowd the Vietnamese market, said Michael Sieburg, partner at Asia-focused consulting firm YCP Solidiance. But interest in the market from Chinese players is piquing, especially following the clampdown that wiped out many platform operators in China.

A report published in April by Chinese state financial news outlet Securities Times alluded to the fact that China’s strict regulatory environment had driven a host of online lenders, cash loans, and fraudulent financial services operators to Vietnam.

Among the existing P2P lending services, roughly a quarter of the forty existing platforms in Vietnam come from China.

The country’s economy is expected to grow at around 6.7% this year, the fastest rate in Southeast Asia. Consumption, fueled by rising income levels, has facilitated the demand for P2P lending and consumer finance, said Sieburg. P2P lending also provides an additional source of financing for small and medium-sized enterprises, he said.

There are risks, of course, as the regulatory frameworks are still in development. Sieburg said that is why the government is trying to tighten regulations, aiming to mitigate the risks while allowing the market to grow.

“Both market players and government regulators will be watchful and wary of players seeking to take advantage of regulatory loopholes in Vietnam, especially from markets that recently experienced notable risky and fraudulent practices,” said Sieburg.

Sieburg said this could impact existing businesses and limit possibilities for new market entrants.

China’s P2P lending market had been growing nearly unregulated for years before the government began its crackdown. As a result, the sector was plagued with fraudulent activities.

What China’s P2P lending market underwent over the past years will likely prove instructive for Vietnam and other emerging markets, said Sieburg. “The government will be keen to proactively rather than reactively increase oversight to prevent fraudulent practices from impacting the market.”

Briefing: Tencent appoints new heads of digital banking and fintech units

腾讯内部发文宣布两项人事任命 赖智明、林海峰两高管调岗 -

What happened: Tencent has appointed the former head of its fintech business, Lai Zhiming, as the new chairman of Infinium, the digital banking joint venture in Hong Kong between Tencent, ICBC, and Hong Kong Exchanges and Clearing. Meanwhile, Lin Haifeng, previously the investment and management partner at the company, has replaced Lai as the new head of the fintech unit.

Why it’s important: The leadership shuffle comes as fintech becomes an increasingly important business unit for the Chinese internet giant. Tencent's latest financial results show that fintech and enterprise-facing services is its second-largest division, accounting for a quarter of its revenue. The company operates one of the largest mobile payment platforms in China, WeChat Pay, and is a major investor in fintech startups in China and overseas. Tencent recently obtained a license from Hong Kong’s banking regulator, joining companies including Ant Financial and Xiaomi in a race to set up virtual banks in the city.

Briefing: Ping An Insurance's OneConnect may IPO in New York, not Hong Kong

Ping An's OneConnect leaning towards New York over Hong Kong for IPO: sources - Reuters

What happened: Ping An Insurance’s fintech unit OneConnect is leaning towards New York as the destination for its initial public offering (IPO), which could take place as early as in September. The fintech company is pondering a listing in the US in the hope to achieve a higher valuation, according to sources cited by Reuters.

Why it’s important: OneConnect had been planning its Hong Kong listing since the beginning of the year. It could raise up to $1 billion and achieve a valuation of $8 billion. Hong Kong has become an attractive destination for Chinese tech company IPOs, thanks in part to the stock exchange’s listing reforms last year. However, many of the board's new listings have posted weak performances. China and US trade tensions likely made New York a more attractive location for companies as its markets are considered more mature and predictable. Moreover, the ongoing protests in Hong Kong will likely contribute to ongoing market jitters.

Briefing: Citigroup looks to Asia, Ant Financial for future digital strategy

Citigroup Sees Asian Firms Like Ant Financial Setting the Pace - Bloomberg

What happened: US banking giant Citigroup is looking to use financial technology and services that have caught on in Asia, such as mobile payments and credit pre-approvals, as it draws up a road map for its global digital strategy. The company has been building out its mobile app back home, and is taking notes from Chinese fintech giant Ant Financial. Alibaba's fintech affiliate has created an entire financial services ecosystem, Stephen Bird, Citigroup's consumer banking chief, said on Wednesday at a conference in New York. “We’re using the Far East as a clarion call as to where it’s all going,” Bird said.

Why it’s important: Emerging markets in Asia, namely China and India, are adopting fintech at rates faster than many developed countries. China in particular has become an important destination for financial service providers looking to expand their digital business. China's established companies like Alibaba and Tencent have been cultivating their fintech business and developing technologies like mobile payment apps. China is signaling that it may open up its financial markets, beckoning foreign banks and other financial service providers.

Briefing: Ant Financial, Vanguard form joint venture in Shanghai

China's Ant Financial, Vanguard form Shanghai-based venture: government records - Reuters

What happened: Chinese fintech giant Ant Financial has set up a joint venture with the Shanghai unit of US-based asset management firm Vanguard, according to government records. The new entity, listed under Vanguard in the national registry for businesses, has registered capital of RMB 20 million ($2.9 million). Huang Hao, president of digital finance business group at Ant Financial, is listed as its legal representative. Ant Financial holds a 51% share and Vanguard's Shanghai unit has a 49% stake, according to Chinese media. The scope of business is listed as investment advisory.

Why it’s important: Vanguard, one of the largest public mutual fund providers in the world, launched its Shanghai unit in 2017. The aim of the new joint venture, some experts believe, is for Vanguard to obtain a mutual fund license in China. Chinese regulators have not officially started issuing licenses to wholly foreign-owned enterprises like Vanguard. Ant Financial, which has grown to become the world’s most valuable unicorn in fewer than five years, has attracted the attention of foreign financial service providers. Last September, US-based insurance provider Fidelity Guaranty & Life announced a research partnership with Ant Financial.

Briefing: Ant Financial planning fintech innovation center in Xiong'an New Area

用奋斗助力数字智能城市建设 - 河北新闻网

What happened: Ant Financial is planning to build a fintech innovation center in the Xiong'an New Area, said Ren Haixia, head of Alibaba's Xiong'an project, though she did not reveal a specific timeline for the launch. The company has rolled out a blockchain-based home rental platform, which is part of the larger plan for the innovation center. An Ant Financial spokesman confirmed to TechNode that it has collaborated with local entities on fintech projects. There will be more cooperation between Alibaba and the special economic zone and more projects are underway, including blockchain and cloud infrastructure development, according to the Hebei news outlet citing Ren.

Why it’s important: The Xiong'an New Area is a special economic zone proposed by President Xi Jinping, and established in 2017. It is located outside of Beijing in the northern Chinese province of Hebei. With favorable policies to promote the growth of the high-tech industry, the Xiong'an New Area has attracted China’s tech giants, including Alibaba, Baidu, and Tencent, to set up branches. Alibaba and its fintech arm, Ant Financial, entered into strategic cooperation agreements with the economic zone in late 2017 and pledged to turn it into a "prototype smart city." So far, Alibaba has launched a cloud data center, an intelligent city planning platform, and a blockchain-based home rental platform. Cainiao, Alibaba's logistics company, recently launched unmanned delivery vehicles in the zone.

Correction: This article has been corrected to reflect that Ant Financial has collaborated with local entities, not local government, on fintech projects.