Alibaba has rebranded its Alipay unit under the new Ant Financial Services Group that consolidates all of its financial services entities

Country: Chinaantfinancial
Year: 2014

  • The rebranding of the Alipay unit to Zhejiang Ant Small and Micro Financial Services Group Co, or Ant Financial for short, is part of a strategy by Alibaba and its affiliated companies to accelerate development of financial business
  • Ant Financial now oversees 5 entities including payments service Alipay and Alipay Wallet, investment fund Yu’e Bao, P2P lending platform Zhao Cai Bao, MYBank, a private bank and user credit scoring system Sesame Credit
  • In Oct 2015, Alibaba Group and Ant Financial have co-invested for 25% stake in Indian mobile payment and commerce platform, Paytm

Ant Financial

Value Proposition 

  • The 5 entities under Ant Financial are affiliated with Alibaba but were not part of the company that is listed on the New York Stock Exchange
  • Ant Financial, is estimated to be valued between $45 to $50 billion, with an IPO expected sometime next year and Alipay which was spun out from Alibaba in 2011 is considered by analysts as one of the most valuable assets in Ant Financial – e.g. in 2014, Alipay handled nearly $800 billion in payment volume, while almost 80% of the merchandise value ordered on Alibaba went through Alipay
  • Competitors in digital finance in China include giant rival Tencent, which has a digital bank of its own named WeBank and numerous other rising Fintechs such as DianRong and which partnered with US ZestFinance etc.

1. How does payments service, Alipay/Alipay Wallet, work? 

  • The buyer chooses a product and makes the payment to the seller via Alipay
  • Alipay, instead of transferring the money to the seller’s Alipay account immediately, keeps the money as escrow and informs the seller that the buyer has made the payment. At the time the money is neither directly controlled by the buyer nor the seller
  • The seller sends the product to the buyer
  • The buyer receives the product, and makes confirmation in their Taobao or Alipay account
  • Alipay receives the buyer’s confirmation, and sends the money to the seller
  • The service is also enhanced with convenience for users with its AliPay Wallet for bills and offline services payments
  • Key statistics:
    – Number of registered users of Alipay: 350 million as of 19 June 2015
    (Comparatively Paypal has more than 169 million)
    – Total payment volume of Alipay: USD519 billion as of 6 May 2014

2. How does investment fund, Yu’e Bao, work? 

  • Users put their money into a principal guaranteed financial product, which invests in funds for interests
  • There is no minimum amount and customers can withdraw their cash anytime

3. How does the P2P lending platform, Zhao Cai Bao work? 

  • SMEs and individuals can borrow from individual investors directly after a bank has vetted the loan and guaranteed that the money will be paid back
  • The money for each loan comes from a maximum of 200 investors
  • There is no maximum for how much an individual can invest, while the minimum usually depends on the loan size and the number of investors

4. How does the online private bank, MYBank, work? 

  • There will be no physical outlets and offline brick and mortar services with MYBank fully operating on “clouds”
  • To work around the central bank requirement that everyone must go to a bank to have their identity verified by an employee when opening an account, MYBank will pair up with other banks so it can lend to people by sending money to their account with the bank
  • Ant Micro will be part of MYBank

5. How does user credit scoring system, Sesame Credit, work?

  • Sesame system will provide user identification and verification, credit scores and reports based on Alipay users’ tracks online
  • The biggest advantage of the Sesame credit scoring system is in the purchase data and user behaviour insights Alibaba has been collecting