On the evening of August 14th, JD Group released the 2017 second-quarter earnings report. The financial data of JD Finance didn’t be listed on the reports, which marked the realization of the news— “JD Finance would be separated from JD Group”. With the end of Q2, JD Finance completed the separation, and its finance data will no longer be incorporated into the JD Group’s consolidated financial statements. The previous data of JD Finance in the statements are listed as an end to operation. JD Finance to JD Group is like Alipay to Alibaba.
Since the beginning of last year, JD Finance planned to be separated from JD Group and go private, which has been settled in March this year. With the benefits of the JD ecosystem and financial technology, JD Finance has accumulated more than 100 million C-end users and 10 thousand B-end users, covering many fields including the Quick Pass, financial management, credit cards, rural finance, supply chain finance. In more than one year, JD Finance rapidly expands its own territory through strategic investment, including investing in the Meili Finance (美利金融), Paymax for the blue collar’s instalments (蓝领分期品牌买单侠), huifenqi for rent instalments(租房分期平台会分期), Huasheng Haoche for car instalments(汽车金融平台花生好车), taodangpu for physical mortgage platform(实物抵押平台淘当铺).
The “separated” JD Finance may gain many benefits, including smaller commercial risks, better financial services, and higher assessed value. The next move will decide whether JD Finance can win the above benefits or not.
Internet technology tycoons choose to separate the financial businesses from their own for three reasons: 1) to become domestic enterprises; 2) to gain more financial licenses and; 3) to obtain support from financial markets. The logic also applies to the spin-off cases like the Ant Financial and Baidu Finance.
In insiders’ view, an important reason for JD Group’s behavior is to obtain domestic financial licenses. Alipay gained the licenses successfully after it transferred into a domestic institution, then there was a financial science and technology revolution in China’s Internet financial field. Because JD Group has foreign investment background, it’s hard for JD Finance to obtain financial licenses. But after the separation, JD Finance can obtain the licenses easily for its domestic institution statute. Indeed, in the past few years, JD Finance’s short plate was also more obvious. At present, although it has licenses for payment, microcredit, fund sales and payment, insurance brokers and factoring, but no licenses of higher content including banks, securities, insurances, trust, and funds.
In the context of China’s strict financial supervision, licenses are becoming increasingly important and scarce. JD Finance, and even CEO Richard Liu are longing for the licenses. Liu once said, “in the future, besides financial products and services, JD Finance would enter into fields of securities, credit, banking, insurance, and obtain licenses through self-application or investment.” At present, the two major asset-ends businesses of JD Finance—supply chain finance and consumer finance, mainly rely on the ABS. Although the cost is already the lowest level of market-oriented financing, it is still higher than that of institutions with licenses in the interbank market.
A lot of Internet financial enterprises are budding in, growing at, and separating from E-commerce giants. The news that the Ant Financial set to list on A-share market still linger on our ears, and people also pay great attention to JD Finance’s IPO. JD Finance couldn’t set on A-share market by the regulations, but the separation helps it clear the obstacle. On the other hand, JD Finance has not disclosed the profit situation. According to insiders, it may still be in loss, and not satisfies the domestic A-shares listing conditions according to the current requirements of the enterprises’ financial indicators. At the annual meeting of JD Group in 2016, Richard Liu said that “in the next three to five years, besides JD Group’s listing in the US, we would establish more than two listed companies.” He also pointed out that “starting from JD Finance, for every listed companies in the future, our group would take out a large number of IPO from its subsidiaries to your.” But, from now on, it’s still a question that when JD Finance can make profits as it still faces many challenges in its business.
In the second half of Chinese martial arts, masters compete with each other with some peace but useful skill, rather than any showy but not practical gestures. In the financial science and technology era, valuable data are the useful skill and always the core of BATJ contention. So, data are the trump card of JD Finance. It accumulates a large amount of credit data in the consumer consumption and store management, which enable JD Finance to improve loan efficiency without manual auditing and reduce risks according to public data. Meanwhile, these data are open to the public and support the traditional financial institutions’ risk control.
How to use these data? After all, whatever it is, Internet finance or financial science and technology, the essence is risk control, which requires these companies fully use the big data to precisely “paint” the user attributes. It is mainly based on the users’ “three dimensions”: natural, behavior, and transaction attributes, which respectively refer to users’ basic information, users’ demand, custom and preferences, and data related with capital including the purchase price, instalments, single purchase quantity, purchase frequency and logistics. Besides these data, JD Finance need to synchronize the data flow, capital flow and logistics chain, and connect both the BC ends to intergrade the online and offline financial industry chain.
Can JD Finance churn up the second half of financial science and technology? Maybe, it is just the beginning.
This article originally appeared in IT Times and was translated by Pandaily.
Click here to read the original Chinese article.