Ant Financial: How a bug took on the world
With one billion customers and beyond, Alibaba’s payments engine is disrupting the financial system in Asia – and it's one to keep an eye on globally too.
Eric Jing’s Ant Financial is about capital and tech, and knowing the right place to put its bets
A financial revolution has flowed from a modest office tower in Hangzhou and it was quick. Alipay was formed in 2004 as the payment engine for Alibaba; today, as Ant Financial, it reaches one billion people all over the world.
Just two years ago, Jia Hang, who was responsible for the global roll-out of the core Alipay payments business, told Euromoney that Ant was aiming to serve two billion customers within the next 10 years. At the time it seemed absurd. Now it looks like it might do it in five.
There are useful lessons in how it got here, for Ant Financial is somewhat misunderstood.
Some people still think of it as a Chinese PayPal, which might have been accurate for a while but is now obsolete. It’s true that Alipay started out as a payments gateway, but, like Tencent’s WeChat, it gained unstoppable traction by going further and making itself essential for everyday life, invading every part of what is, these days, referred to as the customer ecosystem. You can do pretty much anything with Alipay, and increasingly you can’t do much without it.
But Alipay is only part of the picture. Over the years many other businesses have grown out of the same family: Ant Fortune, the wealth management platform, and its Caifuhao AI-driven corporate account that is now used by 80 out of China’s 124 asset management firms; and Zhima (Sesame) Credit, which made a virtue of the fact that there was no established credit scoring system by launching its own, based on people’s interactions with the Alibaba Group.
There is MYBank, the online lender focused on microfinance and small business, which has lent more than Rmb2 trillion ($290 billion) in four years of existence; Ant Financial Cloud; and Ant Financial Technology, a new brand for the suite of technology and AI products and services launched under its new name in September 2018, by which time the products had already been used at over 100 banks, 60 insurers and 40 asset management firms and security brokers.
When Ant launched Yu’e Bao in 2013, a simple fund to monetize cash that customers were parking in Alipay, it became the world’s largest money market fund, almost by accident.
Eric Jing, executive chairman and chief executive, runs a more diversified business than many realize.
Ant is about building tech and putting it into the right places to achieve scale in financial services
Ant’s outward expansion has been smart and apparently successful. There are two thrusts to its approach. One is simply to follow the low-hanging fruit of Chinese tourists transacting overseas. They are the bridgehead into any new market, and it is chiefly through them that Alipay now operates in 54 markets and 27 currencies.
But the other bit, the smart part, is to pick the right partner in every market that looks ripe for an Ant Financial-style approach, buy a minority stake, benefit from the licences and branding that partner already has, inject Ant’s own tech in the back end and watch the money roll in.
Ant’s participation in India’s Paytm is the most obvious example of this, but it is now only one of many: TrueMoney in Thailand, GCash in the Philippines, Easypaisa in Pakistan, and others from Bangladesh to Malaysia to Korea.
All told there are 10 such partnerships, and it’s through these liaisons that Ant now touches one billion people.
It is ingenious: doing it this way means Ant doesn’t need to get a licence in its own right, nor spend a fortune on marketing, since the local partner is already handling all of that. Ant is about capital and tech and knowing the right place to put its bets.
It hasn’t all been plain sailing. The failure to complete a planned acquisition of MoneyGram, which was scuppered by US regulators, was a blow; international remittances were seen as absolutely right for a bit of Ant innovation. In fact, that is still happening, but on a smaller scale and a more piecemeal basis.
In June 2018, just after raising $14 billion in Series-C funding from the likes of GIC, Temasek and Warburg Pincus, Ant announced a cross-border remittance service through the e-wallet platforms of AlipayHK in Hong Kong and GCash in the Philippines, powered by Ant’s blockchain.
This is, apparently, the first blockchain-based cross-border digital wallet remittance service in the world, and is the first of many (Malaysia-Pakistan, benefiting from Ant’s backing of the Telenor microfinance business in Pakistan, has since followed).
There are still questions about just how much further Ant Financial can reach into financial services, particularly globally; getting the easy money of under-served retail is one thing, but can or should they go deeper into banking territory?
Ask Ant insiders today what the company really is and they have got past that whole fintech-vs-techfin argument. They call themselves an open shared credit system and financial service platform, delivered through technological innovations.
This, more than anything, is what now defines Ant: it is about building tech and putting it into the right places to achieve scale in financial services. It is proving an extremely compelling proposition.