Project
p98929892
Project.docxFinal Project Outline
l Intro.
Ant Financial is an Internet financial service company in China. It originated from the third-party payment platform "Alipay" on Taobao. It was formally established in 2014 and spin-offs the financial business of Alibaba Group. As of 2018, the valuation of Ant Financial For 160 billion US dollars. The origin of the name of Ant Financial is also because the company pays attention to small things and details. Although ants are small, they also carry small dreams, working together can also create amazing power.
Many of Ant Financials’ products are also well-known to everyone. The most well-known is the Alipay t platform, and Yu'E Bao is a small decentralized cash management tool that can also help users buy money fund products on Alipay with a low threshold. Huabei (Huabei) is a consumer credit product launched in 2014. Similar to credit cards, it can be used for online and offline physical consumption.
l Describe the potential market for the technology, how it will impact banks and society. What are the tradeoffs? Who stands to gain or lose?
1. Huabei: The area of the petty loan
a) Registration is easier and faster
b) Get cash red envelopes of varying value
c) The platform is more accurate to users' reputation
d) Low application threshold
e) The interest-free period is up to 41 days
f) Limited loan amount (500-50000)
2. Yu'E Bao: The area of the current depoist
a) High degree of freedom of deposit and withdrawal
b) Convenient to operate other businesses (buying funds, binding bank cards, paying water and electricity grids)
c) The income can be checked at any time, and the income is visible every day
d) Daily interest rates are lower than those of banks
l Within the 2 areas of fintech you chose, tell me who the market leaders are at the moment and how did they get there?
If we are going to focus on the Chinese market, the market leader of the Fintech area of petty loans and current deposit would be the Ant Financial.
1. Intro of the Ant Financial
a) Ant Financial is the financial product department of the Alibaba Group.
b) Market share of the online payment market: 47%
c) Valuation methods of IPO pricing: $200 billions
2. Fintech Products of Ant Financial
a) Alipay (支付宝)
b) Yu’E Bao （余额宝）: the product of the current deposit area
c) Huabei （花呗支付）: the product of the petty loan area
d) Alipay is an online payment smartphone app, Yu’E Bao and Huabei are the financial products that are put in the Alipay app.
3. History of Ant Financial
a) Functioned at 10/15 2002 as the payment method to Taobao.
b) Rare people used that time because the worry of security
c) Create a specialized budget for their customers and promised if the account of the customer was steeled, then Alibaba will pay back the whole amount of money that they put in the Ant Financial Account.
d) After smartphones popularized in the year 2010, Alipay created the Alipay App. Huge amount of customers were attracted to use their service.
e) Now, Alipay has already become an indispensable part of the daily life of Chinese people.
l Propose your own fintech product. Describe your market and your competition.
(Find out latter)
l Conclusion
Introduction
The core of Fintech is to use dedicated software and algorithms on computers and more and more smart-phones to help companies, business owners and consumers better manage their financial operations, processes and lives, Fintech, the word, is a combination of "financial technology". Financial technology originally referred to the reorganization of the back-end computer technology of a bank or trading company. Now it describes a variety of technical interventions in personal and commercial finance. Financial services institutions provide multiple services under one umbrella. These services cover a wide range from traditional banking to mortgage and trade services. For consumers, as far as most technologies are concerned, the younger you are, the more you will realize and accurately describe what financial technology is.
Fintech has been involved in dozens of applications and has changed the way consumers obtain finances. Before the development of Fintech, companies would go to banks to obtain loans and financing. But with the rise of financial technology, companies can easily obtain loans, financing and other financial services through mobile technology. “The global fintech market was valued at about $127.66 billion in 2018, and is expected to grow to $309.98 billion at an annual growth rate of 24.8% through 2022.”
According to Fintech In China,“China has been at the forefront of fintech growth and is the largest fintech market in the world. In terms of investments, according to the Accenture analysis, the value of fintech deals in China in 2018 was $25.5 billion. That’s a nine-fold increase over the previous year and accounts for 46% of all fintech investments globally in 2018”. According to a report by H2 Ventures and KPMG in October 2018, China accounted for four of the world's top ten fintech companies. Overall, it pointed out that among the top 100 fintech companies, 34 are payment companies,The main leading companies are Ant Financial and Tencent. The business models of Tencent and Alipay are very similar. Both support online payment, QR code payment, and some financial fund applications. However, Tencent mainly conducts their Fintech business on Wechat, which has been just known as a social media app, and the Fintech part is just an additional function. On the other hand, Alipay was created as the application of Fintech. The chat window in Alipay is an additional function to quickly chat with friends to determine whether the down payment has arrived.The image of these two smartphone apps would be really different to the customers.
Since we are talking about the Chinese fintech market here, the leader would undoubtedly be the Ant Financial, which is a subsidiary corporation of Alibaba. Ant Financial is an Internet financial service company in China. It originated from the third-party payment platform "Alipay" on Taobao. It was formally established in 2014 and spin-offs the financial business of Alibaba Group. As of 2018, the valuation of Ant Financial For 160 billion US dollars. The origin of the name of Ant Financial is also because the company pays attention to small things and details. Although ants are small, they also carry small dreams, working together can also create amazing power.
Many of Ant Financial’s products are also well-known to everyone. The most well-known is the Alipay t platform, and Yu'E Bao is a small decentralized cash management tool that can also help users buy money fund products on Alipay with a low threshold. Huabei is a consumer credit product launched in 2014. Similar to credit cards, it can be used for online and offline physical consumption.
The Advantage for China Develop Fintech
Ant Financial has already become an indispensable part of Alibaba. Their main smartphone app product, Alipay, has occupied about 47% of the Chinese mobile payment market. Furthermore, because of the popularization of smartphones in China, the market of mobile payment is very energetic. Based on the report made by Newzoo.com, the top three countries that have the most smartphone users in the year 2020 are China, India, and the US, and there are almost 874 million smartphone users in China.
source: https://newzoo.com/insights/rankings/top-countries-by-smartphone-penetration-and-users/
This high population of people who hold smartphones gives the mobile payment market a really good opportunity to develop in China. According to the 2019 China Mobile Development Report that was created by Ant Financial and China State Information Center, between the year 2014 to 2017, within all online transfer accounts, the payment that finished by un-banked-mobile-payment has an obvious increase. The mobile payment method had disposed of 239.3 billion transfers, which sums ¥10.5 billion Chinese Yuan in the year of 2017. Until the second half of the year 2018, the permeability of the mobile payment to all the smartphone users, which is the percentage of people who use online payment on their phone, has reached to 92.4%. (page 8)
Based on the data above, it would really be easy to tell the affection of Alipay to the Chinese payment market, and this also gives Ant Financial a good chance to launch their other financial product through Alipay. Alipay is not just an online payment app, it more likely can be counted as an integrated FinTech app. In the area of the petty loan and current deposit, Ant Financial also had created two products, which are Huabei, and Yu’E Bao.
Huabei (花呗）
Huabei can be thought of as a really low balanced online credit card that works for mobile payment. The available amount of money is usually lower than ¥10,000 which is about $1,500. However, this low limit is reasonable. Based on the 2017 Young Consumer Life Report that was given by Ant Financial, in the year 2017, the main group that would like to use the Ant Created pay would be post-1990s generations. The report shows, in all 100 billion of the Huabei users, people who were born between the year 1990 to 1999 would occupy about 47.25%. Back to 2015 when the Huabei just launched, people who were born between 1985 to 1990 were the main group of consumers, but this group is 11.9% lower than 1990s. Based on this report, the strategy of their target consumer would be young generations that just graduated from college, or even people who are still in school. Within these groups, they might have never used a credit card, so according to the words of Shengfa Yu, who is the vice president of Ant Financial, the “Huabei is to foster the potential user of credit cards for banks.” Whichever group they are focused on, the common point of them would be that they might not get much deposit, but would have a high demand on consumption. If the limit is set too high, the risk of users’ default would be much higher than setting a lower limit.
However, it would not be enough for the company to set the low limit to all their users just because they want to get rid of the risk of default. It would not be fair to the people who payback the money on time every month. In this case, they use their process to decide if the customer matches the condition to apply for a higher limit. Because Alipay is a smart phone based financial app, it would be easy for them to collect the data about the consumption custom, and if they payback their bills on time. Based on this advantage, Ant Financial had created another product in Alipay called the Zhima Credit.
This progress is basically used to calculate the credit point for each customer of Alipay. Based on the number of their credit, they are able to apply for a higher limit of consumption in the Huabei. Furthermore, the higher credit could also give the user the advantage to use some sharing bike or car without the need to pay for the antecedent money.
On the other hand, if the user defaults on paying back, they will be charged an overdue fine with a 0.05% interest per day. Which is the same number as most banks have in China, but banks usually will count the overdue fine started the fourth day after the due date. The banks usually have a three days overdue permission. However, the Huabei will count it right after the due day of paying back. This will force the user to manage their consumption very carefully, and be careful to not pay the bill late. The Ant Financial, however, also gives the users who might forget to pay back the bill another choice. They can save their money into Yu'E Bao, and the Huabei will be charged from Yu’E Bao every month.
Yu’E Bao（余额宝）
The publication of Yu’E Bao is one year earlier than the Huabei. At the beginning of Alipay was published, it was just like a digital wallet service. The users could transfer their money into that wallet and make payment with it. However, only a few people would like to transfer their money into Alipay because there would not be any advantage for them to put their money to a mobile app but not make a current deposit in the bank, which will be much safer.
In the year of 2013, the Ant Financial had rolled out Yu’E Bao as an additional function Alipay. The word Yu’E (余额) basically means “the remaining money” in Chinese. Therefore, the name “Yu’E Bao” means you can put your remaining money in, and will benefit you. Customers can choose to transfer their money into this application, and their money will automatically be used to buy money funds with a 1% to 4% interest rate per year. The funds that were purchased on Yu’E Bao would be the same as the funds can be found at the funds market. However, Yu’E Bao has served a much easier way to manage money for people who do not have the knowledge of funds. Furthermore, the money in Yu’E Bao does not have any redemption time that needs to be waited. It can be transferred in or out whenever the customer wants. Therefore, to most users of Yu’E Bao, it is more like a current deposit application rather than an online fund purchase application.
The most important advantage for Yu’E Bao would be the interest will be counted every single day after the money was transferred in. Therefore, if the user transfers 10,000 Chinese Yuan into Yu’E Bao with a 3% interest rate, the user will receive¥10,000*(1+0.03/365)365=¥10,304.5 in one year. However, if the customer chooses to put the same amount of money in the bank with the current deposit, the interest rate would be much lower. The interest rate for current deposit of most Chinese would only be 0.35% per year, and the interest will be counting every month. Then the user will get ¥10,000*(1+0.0035/12)12=¥10,035.06 in one year. In this case, the user will get about ¥270 difference in the revenue at the end of the first year. Through the time pass, the difference will be increased more.
Interest Rate of Current Deposit for Chinese Banks: https://cj.sina.com.cn/articles/view/6880738327/19a1fbc1700100guli
