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alibaba, amazon, china, Consumer Banking, digital banking, hongkong, Payments, tencent

$41 Trillion in Mobile payments – China tech target digital banking

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$41 Trillion was the size of China’s mobile payments market in 2018. It is perhaps counter-intuitive when the payments market is more than three times the size of China’s GDP ($12 Trillion). That’s because GDP is based on value creation, not on transaction volumes.

Let me explain it with a crude example. A couple of weeks back, two of my friends and I went into a sports shop in Chislehurst, and bought a cricket bat for £240 for the summer. We knew we were going to share the costs at £80 each. I paid the shopkeeper £240, and then my friends paid me £80 each.

While the value created/exchanged in this case was for £240, payments happened for £240+£80+£80 = £400. GDP is calculated based on the £240, and payment volumes would account for £400.

In the initial days of my discussions about China Fintech, I would often praise China’s Fintech businesses as perhaps the largest in the world. China is doing Trillions in mobile payments, and the US is still groping its way towards $200 Billion. Purely from a size perspective China is light years ahead, but the business models there are different.

Fintech is used as a business model by lifestyle firms in China and broadly Asia. Fintech is not their core value proposition, at least it is not until they onboard a few million customers. Their core lifestyle business is then augmented by Fintech services for their customers, and that makes their life style business stickier.

I have touched upon this in detail in one of my previous posts on how lifestyle businesses have evolved into Fintech heavy hitters in Asia. And payments is the lowest common factor between ecommerce/lifestyle businesses and financial services. Therefor, firms like Alibaba, Tencent, Grab and Bykea have integrated payments to their core service offering.

However, the Chinese tech giants have identified that it was time to upgrade from payments into banking. Earlier this month Alibaba, Tencent, ZhongAn and Xioami were granted a virtual banking license in Hong Kong.

Alibaba applied for a banking license for its Ant SME services, which is a subsidiary of Ant Financial. Tencent and Xiaomi did a Joint venture to go for the banking license. Xiaomi is the fourth largest mobile phone manufacturer in the world with over 120 Million smart phones in 2018.

When Amazon began offering lending to its SME base, there were headlines that they would soon go for their banking license. However, the trend these days is that the East would lead and the West and the rest would follow. Now that China tech giants have upped the ante with a banking license, would the US peers respond? Watch this space.

Arunkumar Krishnakumar is a Venture Capital investor at Green Shores Capital focusing on Inclusion and a podcast host.

I have no positions or commercial relationships with the companies or people mentioned. I am not receiving compensation for this post.

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china, Fintech, Fintech Global Tour

Podcast with Urs Bolt after Davos, WEF2019

Urs Bolt comes also from the `O​ld Guard` of the finance world and joined the independent fintech movement in late 2017. He has already become a Fintech influencer and builds bridges between Switzerland and China, with his own unique skill set.

We spent three days together in Davos during the WEF and in this podcast, he shares some of his takeaways from the different events he participated in and of course, his insights on the ongoing Techfin transformation in China.

He speaks about Ant Financial, financial education in China, the financial surveillance challenge and much more. Enjoy.

We closed our discussion with a highlight of an upcoming unconference in Davos that is an annual tradition for both myself and Urs. Last year, I did a one hour talk (mostly standup comedy, see here) and Urs participated in the Talk battles.

Check out and join us this year at CryptomountainRocks10 – 12 March 2019. in Davos

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Efi Pylarinou is the founder of Efi Pylarinou Advisory and a Fintech/Blockchain influencer.

Get fresh daily insights from an amazing team of Fintech thought leaders around the world. Ride the Fintech wave by reading us daily in your email.

ant financial, china, Consumer Banking, credit scoring, tencent

China’s Social Credit Score – Economic Genius or Killer of an open society?

I am in the London underground, and my mobile tells me if the person sitting next to me has defaulted on their loans. I can now decide if I still want to sit next to them. – Imagine a world where that could be true

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I am trying to book a Eurostar holiday, and I get told on their site that, I can’t travel on Eurostar because I missed my credit card payment last week – Imagine a world where that could be true.

I walk into a Starbucks and I get a free drink because my mortgage payment was done on time – thanks to my direct debit. I could go on, but you get the idea.

China is working on a Social Credit Scoring system that could pretty much make life look like what I have described. For me, it’s too intrusive. But in a world (within China) where Google has a single digit market share, thanks to censorship, nothing is intrusive (looks like).

The Chinese government claims that it needs the system to promote social and economic trust, and plans to launch the system by 2020. No wonder, China tops the world in AI patents. They are already piloting the system in several Chinese cities.

“allow the trustworthy to roam everywhere under heaven while making it hard for the discredited to take a single step.”


– From the founding document of the social credit scoring system

The government’s drive to get the social credit score underway is largely inspired by existing private setups like Sesame credit. Sesame credit is the credit system created by Ant Financial. Ant financial and Tencent have managed to create a universe of consumer data through their ecommerce and messaging offerings. And they leveraged that data to provide a wide suite of financial services. The worrying aspect is that the government’s credit scoring initiative may tap into this data.

Economists highlight that China’s growth, at least when compared to its neighbour India, has slowed down. It may not mean much at this point as China’s economy is almost 4 times bigger. But the slowest growth rate in 30 years is something that has got the government thinking.

South East Asian countries like South Korea struggled to transition from input based growth to productivity based growth. In China’s case, the labour force has maxed out, and now they are focused on driving productivity. Is this social score system designed to make people more productive?

In a survey conducted last year by a European researcher, 80% of the respondents voted in favour of this system. The challenge is that the social credit scoring system has a good chance of making the rich – richer and the poor – poorer. Getting on the economic ladder would be harder for the bottom of the pyramid. However the Chinese government chooses to look at it differently.

Keeping trust is glorious and breaking trust is disgraceful

Just that line sounds so binary and feels mutually exclusive and is an antithesis of an open society. Then there is this philosophical argument of what’s more important? An egalitarian society where privacy is respected, or an ethical, moral, compliant and conformed world. There is no binary answer to that either.

Only time will tell if this system delivers the desired outcome – at least in a Chinese sense. Watch this space.

allianz, china, emerging markets, india, InsurTech, Vietnam

Insurtech Front Page Weekly CXO Briefing – Emerging markets

emerging_markets

The Theme last week was about Online Insurance Marketplace.

The Theme this week, is about emerging markets. Emerging markets are about hopes, potentials and future growth. When a market grows huge enough, it could evolve into something better.

For more about the Front Page Weekly CXO Briefing, please click here.

Incumbents embracing InsurTech is a common theme in our posts. This time, it’s about customer engagement.

 

Story 1: Global reinsurance giant drops “emerging market” label for China

Extract, read more on Asia Insurance Review:

“Global reinsurer Swiss Re no longer places China as an emerging market, but instead views the country as a important strategic market, according to Mr John Chen, head of Reinsurance China and China country president for Swiss Re.”

What is an emerging market? According to Wiki, an emerging market is a country that has some characteristics of a developed market, but does not satisfy standards to be termed a developed market. And according to Insurance Information Institute, China’s insurance market by annual premiums has been top 2. It’s safe to say China was huge enough to graduate from the identity of emerging market.

 

Story 2: Allianz launches reinsurance business in India

Extract, read more on Verdict:

“Allianz Global Corporate & Specialty (AGCS), part of German insurance group Allianz, has set up reinsurance operations in India after securing regulatory nod.

The new reinsurance branch will be located in Mumbai. It will provide facultative, proportional, and non-proportional reinsurance solutions for property, liability, marine, financial lines, construction and engineering, as well as energy.”

India, despite of the biggest population, is more like an emerging market than China. According to IRDA, India’s premium income in 2017 is 98 million USD which can’t make top 10 worldwide. But the population is in place, therefore the potential.

 

Story 3: Allianz to Enter Vietnam Insurance Market via Joint Venture with IT Firm FPT Group

Extract, read more on Insurance Journal:

“Allianz announces its intention to enter the general insurance sector in Vietnam through a digital joint venture (JV) to be set up with the FPT Group – driving long-term success in the market and expanding Allianz’s footprint in Asia.

FPT Group, as the strategic technology partner, will support Allianz in the fast-growing Vietnamese insurance market to develop innovative digital insurance products and services to meet the protection needs of local customers.”

Vietnam is one of the most promising emerging market in the world as it is likely to become a next world factory after China. Insurance, as a financial infrastructure, is an attractive treat for top insurers like Allianz.

 

Since the developed markets have a sophisticated operating system for insurance. Gaining old policyholders’ attention can be intense. The emerging market is a great new battlefield for international insurance superpowers. I think we will see more and more top insurers tapping into emerging countries in the years ahead.

 

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Zarc Gin is an analyst for Warp Speed Fintech, a Fintech, especially InsurTech-focused Venture Capital based in China.

Check out our advisory services(how we pay for this free original research).

To schedule an hour of Zarc’s time for CHF380 please click here to send an email.

alibaba, amazon, china, Consumer Banking, ecommerce, Payments, techfin

Amazon vs Alibaba – the clash of the mighty techfins in numbers

We may have to soon rename ourselves as Daily Techfin. We have been focusing on the breaking of banks and their resistance to the Fintech avalanche, while Techfins have been slowly but surely capturing the FS world. Lots of numbers coming your way – so be warned.

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Money 2020 opened up in China, Hangzhou – the home of Ant Financial – for the first time this year. China is really were Fintech is happening at scale, and just by sheer numbers, the West look dwarfed. This is largely driven by the growth of Alibaba and Tencent.

Alibaba did $31 Billion in sales on Single’s day, and Amazon had its best sales in history through the 2018 thanksgiving period with 180 Million transactions.

Amazon haven’t announced exact sales revenues, but using Statista’s average online transaction size in 2017 of $81, their total sales could have been $15 Billion.

That just shows the scale of China vs rest of the world. Also, the total ecommerce sales number on Cyber Monday in the US was $7.9 Billion, that is just about 25% of what Alibaba achieved.

While the US Ecommerce market is set to reach $630 Billion by 2020, China’s is projected to be around $1.7 Trillion. Its fascinating to see how these two giants compare against each other in the ecommerce space. But, by Alibaba (Ant’s) own admission ecommerce and payments are just a foot in the door.

Some of the metrics discussed at Money2020 in China this year for different financial services that Ant offered were the following:

“1+N” – Onboard the customer with 1 QR-code – as payment technology. Cross sell marketing, training, cash management, loans, insurance etc.

“310” –  These are their KPIs for SME loans: 3 minutes for processing application, 1 second for monies in the bank, 0 manual work.

“212” –  Their KPIs for Insurance claims – 2 minutes for processing application, 1 second for review, 2 hours for insurance settlement to the account.

Stats Source here

This is only managed by cutting edge technology used with alternate data on consumers, to model their behaviour and assess risks in real time. I had already written about how Amazon helped an SME I knew, with a loan decision on the same day. Ant are just doing it better.

Now who is winning the battle? Amazon definitely have the global advantage. As of 2017 they had 2 Billion visitors per month, whereas Alibaba was at about 900 Million visitors per month. But that doesn’t necessarily translate into Financial Services that are provided by these firms.

In 2017 the number of Alipay users were 400 Million compared to Amazons 33 Million users, and as of September 2018, there were 520 Million Alipay users. Comparing transaction sizes is almost meaningless, as Alipay is light years ahead.

And all this with just 55% internet penetration in China (vs 78% in the US), with Alipay conquering 54% of China’s mobile payments. If payment services that the largest Techfin in the West does, is about 10% of that of the largest Techfin (of the East), it should give a perspective of what it means to other ancillary Financial Services such as lending, insurance etc., And if that is the comparison between the US and China, UK and European Fintechs perhaps won’t even come close.

I must confess that, I started this article wanting to just talk about Alibaba, China and Money2020. But when I started to look at the startling number differences between Amazon and Alibaba, I had to make it more of a comparison (although there is not much of a comparison).

An American friend of mine who recently visited China, mentioned that going to China felt like visiting the future. With the numbers that I have managed to dig out, China does feel like Wonderland when it comes to Fintech, thanks to its TechFins.

Arunkumar Krishnakumar is a Venture Capital investor at Green Shores Capital focusing on Inclusion and a podcast host.

Get fresh daily insights from an amazing team of Fintech thought leaders around the world. Ride the Fintech wave by reading us daily in your email

 

allianz, axa, AXA Tianping, china, Foreign insurer, InsurTech, regulation

Insurtech Front Page Weekly CXO Briefing – China opening up

AXA

The Theme last week was Artificial Intelligence trends.

The Theme this week is China opening up its insurance market. This is actually a gradual process and now we are witnessing an upgrade from joint ventures to the approval of fully independent foreign insurers in China.

For more about the Front Page Weekly CXO Briefing, please click here.

Editors Note: Insurtech is normally Thursday. We changed to Wednesday this week because this news is big.

For this week we bring you three stories illustrating the theme of China opening up its insurance market.

Story 1: AXA to acquire the remaining 50% stake in AXA Tianping to accelerate its growth in China as the #1 foreign P&C insurer

Extract, read more on AXA press release:

“AXA announced today that it had entered into an agreement with the current domestic shareholders of AXA Tianping Property & Casualty Insurance Company Ltd (“AXA Tianping”) to acquire the remaining 50% stake* of the company.

Total consideration for the acquisition of the 50% stake would amount to RMB 4.6 billion (or Euro 584 million*), representing an implied 2.4x FY17 BV* multiple, of which, subject to regulatory approvals, RMB 1.5 billion (or Euro 190 million*) should be financed through a capital reduction of AXA Tianping to buy back shares from the current domestic shareholders.”

AXA Tianping was jointly founded in 2004 by AXA’s subsidiary in China and Tianping Auto Insurance. After 14 years, it has become the biggest foreign property insurance company in China. This purchase, if approved by Chinese regulators, will make AXA Tianping a fully-owned subsidiary of AXA group and help AXA move further in Chinese market.

Story 2: Allianz China unit given regulatory go-ahead

Extract, read more on Reinsurance News:

“Insurance giant Allianz has received approval from the China Banking and Insurance Regulatory Commission for the preparatory establishment of an insurance holding company in China.

Based in Shanghai, Allianz (China) Insurance Holding Company Limited will be the country’s first ever insurance company wholly owned by a foreign insurer.”

This happened a day before the AXA news. But Allianz’s plan was approved by the regulator already. The approach is different, since AXA is achieving it through equity acquisition while Allianz is starting from scratch. But the goal is same, to make presence in Chinese market.

Story 3: China moves closer to allowing foreigners to control insurance ventures

Extract, read more on Reuters:

“China will accept applications early next year from foreign insurers seeking to take control of their local joint ventures and is even weighing giving them full ownership earlier than flagged, people with direct knowledge of the matter said.

The regulator is expected to publish its final guidelines as soon as the first quarter of 2019 and would begin taking applications from interested foreign insurers soon after that, they said”

This article was released last Monday, and certainly it’s a signal. Our first two news proved that things are moving much faster in China.

China has already drawn its roadmap of opening up for the financial sector. Insurance industry is obviously executing the plans with efficiency and determination. I believe there are still huge potentials in Chinese insurance market and the future of insurance market in China will be shaped by Chinese and foreign insurers together.

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Zarc Gin is an analyst for Warp Speed Fintech, a Fintech, especially InsurTech-focused Venture Capital based in China.

Get fresh daily insights from an amazing team of Fintech thought leaders around the world. Ride the Fintech wave by reading us daily in your email.

china, ecosystem, InsurTech, munich re, plugandplay, smart car, zhong an

Insurtech action from China

Actions around China

The Theme last week was Tech giants are serious about insurance

The Theme this week is Insurtech action from China. The Chinese market is a fast growing one for InsurTech. It can be enlightening to see, compare and learn from the Chinese market. We look at 3 news stories illustrating this theme. These stories illustrate actions made by China, from China and for China.

For more about the Front Page Weekly CXO Briefing, please click here.

For this week we bring you three stories illustrating the theme of Insurtech from China.

Story 1: Insurtech is the future infrastructure of insurance, says ZhongAn CEO

Extract, read more on Reinsurance News:

“A joint report by the recently-launched Fintech Research Institute of China’s largest online-only insurer ZhongAn and the financial advisory firm KPMG claims insurtech will enable a more efficient, compatible, balanced and humane insurance ecosystem.”

This is more like a perspective by China (Zhong An), but it is a perspective based on actions in motion. Zhong An has been building its multi-industry ecosystems including auto service, consumption, financing etc. since its founding. Ecosystem is all about partnerships and collaborations, and InsurTech is the core of those partnerships.

Story 2: China’s Attention to Israel Smart Vehicle Market Creates Insurtech Opportunities

Extract, read more on The Times of Israel:

“The Chinese auto industry is yearning for smart-car technologies. In December 2017, the National Development and Reform Commission, China’s chief economic planning agency, revealed a three-year plan highlighting the development of the smart cars industry as a national priority. Without a doubt, by 2020 one in every two new cars sold in China, the world’s leading car market, will be an intelligent one.

Despite popular hype pertaining to autonomous cars, most people don’t understand how highly dependent these cars are on a sense of place. This means that if the map the autonomous car is relying on to navigate is wrong, then the autonomous vehicle is bound to make mistakes as well. French mega insurer AXA for example, is one of the many car insurers tackling this issue.”

The causality chain is a little long here. In short, the promotion on electric cars in China can create new business opportunities for auto insurance and InsurTech can be a big part of it. This is actions from China.

Story 3: Munich Re strikes Insurtech partnership with Plug and Play in China

Extract, read more on The Intelligent Insurer:

“Munich Re has partnered with Plug and Play, a Silicon Valley-based accelerator and corporate innovation platform, to collaborate with emerging Insurtech startups in China.”

Actions for China. Munich Re has been cultivating in Chinese market for a long time. Plug and Play just started its InsurTech program in China this year. They are tapping into Chinese InsurTech from all aspects from accelerating startups, sharing innovation with incumbents etc.

As a market, China has great potential both in individual business and corporate business. As an innovation base, Chinese InsurTech is equipped with mobile Internet features. Either way, it is an attractive destination for global insurance industry.

Zarc Gin is an analyst for Warp Speed Fintech, a Fintech, especially InsurTech-focused Venture Capital based in China.

Get fresh daily insights from an amazing team of Fintech thought leaders around the world. Ride the Fintech wave by reading us daily in your email.