[{"_1":2,"_95":-5,"_96":-5},"loaderData",{"_3":4,"_6":7},"root",{"_5":-5},"user","routes/tag.$slug",{"_8":9,"_83":84,"_92":86,"_93":56,"_94":57},"posts",[10],{"_11":12,"_13":14,"_15":16,"_17":18,"_19":20,"_21":22,"_23":24,"_25":26,"_27":28,"_29":30,"_31":32,"_33":-5,"_34":35,"_36":37,"_47":48,"_76":77,"_78":79,"_80":81,"_82":32},"documentId","g4rrebkgqje232acvpiiiw3o","title","Ep. 11: After Alibaba, Team Jack Ma’s Newest Centacorn: Ant Financial","slug","ep-11-after-alibaba-team-jack-mas-newest-centacorn-ant-financial","excerpt","What do you call a unicorn worth more than $100 billion? A centacorn, of course! This week on TechBuzz China by Pandaily, co-hosts Ying-Ying Lu and Rui Ma discu...","content","What do you call a unicorn worth more than $100 billion? A centacorn, of course! This week on TechBuzz China by Pandaily, co-hosts Ying-Ying Lu and Rui Ma discuss a newly minted centacorn - Ant Financial.\r\n\r\nTechBuzz China by Pandaily is a weekly technology podcast focused on giving you a peek into what’s buzzing within the tech community in China. It is co-hosted by Ying-Ying Lu and Rui Ma, who are both seasoned China watchers with years of experience working in the technology space in China. They uncover and contextualize unique insights, perspectives, and takeaways on headline tech news that don’t always make it into English language coverage.\r\n\r\nAlibaba Group, the owner-turned-affiliate-turned-shareholder of Ant Financial, was valued at $140 billion when it went public in 2014. Now, Alibaba's spinoff payment platform Ant Financial was valued at more than $150 billion in their pre-IPO round in June 2018.\r\n\r\nWhat does Ant Financial do that makes it such a highly valued company? What is the convoluted relationship between Ant Financial, Alibaba, and Jack Ma? Is the valuation a sign that Ant Financial will become a bigger company than its parent, Alibaba Group?\r\n\r\nTo answer these questions and more, Rui and Ying-Ying also invited Wayne Shiong, a notable fintech VC in China, to share his thoughts. Don't miss out on their valuable insights and listen to this week's episode!\r\n\r\nAs always, you can find these stories and more at pandaily.com. Let us know what you think of the show, and don't forget to follow us on Twitter at @techbuzzchina and to like our Facebook page!\r\n

Full Transcript

\r\nWe are TechBuzz China by Pandaily, powered by the Sinica Podcast Network!\r\nWe are a new weekly podcast focused on giving you a peek into what’s buzzing within the tech community in China. We uncover and contextualize unique insights, perspectives and takeaways on headline tech news that don’t always make it into English language coverage. TechBuzz China is a part of Pandaily.com, a new English language site that tells you “everything about China’s innovation.”\r\n\r\n[0:14] Y: This episode is on the Chinese fintech giant, Ant Financial.\r\nR: Now officially the biggest unicorn in the world. In fact, it’s basically the size of the next 3 unicorns combined. Uber, Didi and Xiaomi, who are all around $50Bn.\r\nY: We’ve been calling private tech companies bigger than $10Bn in valuation decacorns. Do we need to start calling Ant, what’s the Latin for 100, cent, centacorn??\r\nR: Ant is really in a league of its own here, not just in terms of valuation, but in terms of scale. In fact, some people think it might be bigger than its mommy, Alibaba.\r\nY: But is Ant really Alibaba’s … child? It’s a bit confusing, actually, as it is with many things in China. But let us tell you the tale of the biggest privately held startup in the world right now. Ant Financial.\r\n\r\n[2:07] R: Big THANK YOU to--- Vivian Yang, Deborah Wei, Ting-Ting Zhou, and Alex Chenesseau. We just put up transcripts for past episodes, so check those out!\r\nY: If you enjoy listening to us, please take the time to leave us a rating or review on iTunes and elsewhere!\r\nR: We’d like to further direct our listeners to subscribe to the weekly newsletter by Pandaily. If you go to Pandaily.com and input your email under the “Subscribe” button on the right, you’ll get weekly China tech delivered to your inbox.\r\n\r\n[2:56] R: The biggest headline in China tech recently, and we do mean BIG, as in astronomical dollar amount big, is the pre-IPO round of funding that Ant Financial on June 8, a whopping $14B. It was bigger than anyone was expecting and values Ant at $150Bn, which is higher than the $140Bn Alibaba was valued at during its IPO back in 2014.\r\nY: Investors were a list of who’s who in private equity: GIC, Warburg Pincus, Canada Pension Plan, Silver Lake, Temasek, General Atlantic, Carlyle Group … Primavera Capital ...\r\n\r\n[3:43] R: It’s the world’s first centacorn, Ant Financial. What the heck is it?\r\nY: It is basically all of Alibaba’s payments and financial services, such as Alipay, the payments product, and a whole host of products directed at consumers and small businesses including an investment platform called Yu'e Bao 余额宝 and small business loans.\r\n\r\n[4:09] R: So it’s a financial services company. Why’s it called Ant Financial?\r\nY: Chinese internet likes animal mascots, and Alibaba most of all. It already has Tmall 天猫 which is represented by a cat, and Cainiao 菜鸟 its logistics company which is a bird. Shenma 神马, a sort of homonym for “what,” is its search engine which has the mascot of a horse. The ant is supposed to represent the company’s focus on small customers and business owners. No matter how small, we want to serve you, is the idea.\r\n\r\n[4:39] R: But Ant wasn’t always called Ant Financial. It actually started its life as Alipay, which is the third-party payments company founded in 2004 by Alibaba. I think most of our listeners are probably familiar with Alipay by now, but if you don’t, it’s a massive payments platform.\r\nY: It has 520mm users, 82% of whom are on mobile. In mobile payments in China, it has a market share of 54%, ahead of WeChat’s 38%. On Alibaba’s last Singles Day or Nov. 11, 2017, Alipay processed nearly 25B $25.9Bn, or something like 325K orders per second. So it’s ginormous.\r\n\r\n[5:20] R: Let’s go back to 2009. Back then, the Chinese government was talking about issuing third-party payment licenses, which it did officially announce finally in 2010. While companies such as Alipay and a bunch of others had already been operating for a few years, they were technically in a gray area. The Chinese government often takes a wait-and-see approach when it comes to regulation, so while everyone in the payments space knew it was coming, no one knew what the specifics were going to be.\r\nY: But people guessed that it would probably preclude foreign-owned companies from getting licenses. That happens in all sorts of industries in China and so no one expected any different for payments. Or at least that was Jack Ma’s excuse when he quietly used another entity owned 80% by himself, and 20% by another Alibaba cofounder, Xie Shihuang 谢世煌 to acquire Alipay from under Alibaba.\r\n\r\n[6:15] R: Why would Alibaba be considered foreign-owned? That’s because Yahoo and Softbank owned about 40% and 30% of the company respectively at around this time. An American firm and a Japanese firm. Yup, foreign owned.\r\nY: So Jack, without telling the other shareholders, put Alipay in a new entity. A Chinese one. When the other shareholders found out later in 2011, it was too late.\r\nR: Honestly, even in Chinese media, this incident, known as 支付宝事件, or the Alipay Incident, is considered a “stain” on Jack Ma’s legacy. No one really knows if Jack truly did it to protect the fledgling payments platform as he claimed, or if he just exploited the fact that the Yahoo and Softbank guys were asleep at the wheel, and gave himself more control over some of the most valuable aspects of the business. People also think that he might have initially started off thinking of holding Alipay hostage to get Yahoo to sell down their stake in Alibaba and gain back some control.\r\n\r\n[7:22] Y: Or maybe he simply wasn’t happy with his measly 7% stake in Alibaba and wanted to start Ant with a clean slate. But he did say back at the time of spinoff that he will never own more of Ant than he does in Alibaba, and Alibaba employees did get shares in Ant -- 40% in total in fact -- at the time of split, so maybe not. In other words, we don’t know.\r\nR: All we know is that it was an ugly dispute that lasted throughout much of 2011 and was very public. It pissed off a lot of Yahoo shareholders, who considered the stake in Alibaba Yahoo’s most valuable asset by this time. Tensions were high My old firm was one of the primary advisors on the Softbank side for this deal and let me just say that we were all working overtime to come to an agreement.\r\n\r\n[8:12] Y: The deal was that Ant would pay Alibaba a sort of royalty fee that was 37.5% of Ant’s pre-tax income. When it became feasible to do so, Alibaba would end the licensing agreement, give Ant all the associated IP and receive an equity stake of 33% in Ant.\r\nR: That’s what happened earlier this year. Ant officially ended the more than $300mm in royalties to Alibaba last fiscal year and welcomed Alibaba as one of its owners.\r\nY: See what we meant earlier about their relationship being very messy?\r\nR: Yup, but that happens all the time in China.\r\nY: And also, Alipay is just the beginning. That’s because while payments is sexy, consumer financial services is much more sexy. And that’s where Yu'e Bao, Ant Financial’s most successful asset management product to date comes in.\r\n\r\n[9:10] R: I’d say Yu'e Bao was a kind of innovation for its time, yeah. Back in 2013, Alibaba basically connected your Alipay account to a specific money market fund, called Tianhong 天弘, in which they own a 51% controlling stake in this fund. They connected the fund to Alipay allowed for 24/7 withdrawal and deposit. Oh, and the minimum deposit was 1 RMB, or about $0.16.\r\nY: Money market funds and accounts are obviously not a new thing, many financial institutions in the US offer them, especially since some new rules were instituted back in 1982. In the US, current rates are a bit north of 1.5% annualized, but many require a few thousand dollars to start and if you do a money market deposit account, which is FDIC insured, you often have limited check writing capabilities, like just a few times a month.\r\n\r\n[9:52] R: We are not banking experts here but as far as we can tell, Yu'e Bao is more like what we would call a money market fund account here in the US, which is not insured by the government. It basically invests in short-term, fixed income products.\r\nY:What happened is as soon as Yu'e Bao launched, it exploded. It launched on June 13, 2013. Within one month, it had reached 10Bn RMB or $1.6Bn in assets under management, aka AUM. By the end of February 2014, it had 81mm users, exceeding the number of stock market accounts in all of China.\r\n\r\n[10:40] R: Why did Yu’e Bao have this explosive growth? Well, a mixture of things. Number one, have you been to a Chinese bank? If not, I will spare you the experience, but let me just say it’s extremely unpleasant. Even today. As for online banking, it’s actually quite good now but back in 2013 it was clunky to say the least. And then don’t forget the account minimums. Who’s going to let you “invest” in a fund for just $0.16? No one, In 2013.\r\nY: Only Alibaba of course. And no, we are not making a mistake here because Ant wasn’t actually established until October 2014, so when Yu'EBao was first launched, it was still under Alibaba.\r\nR: Also consider the interest rates back then. On the day it opened, Yu'e Bao’s money market fund had an annualized rate of 3.2%. Over the years, it’s gone as high as almost 7% to today, where it’s hovering at 3.8%.\r\n\r\n[11:35] Y: An analysis by WSJ last year showed that Yu'e Bao consistently offers 2% more than traditional bank deposits. Again, it’s not riskless, but that’s not a bad place to park your cash with basically 100% liquidity right?\r\nR: No, not that at all. And it’s precisely because the deal was so great for consumers that Yu'e Bao’s AUM grew like crazy. As of March 31, 2018, Yu'e Bao’s flagship fund Tianhong manages 1.7T RMB. That’s about 260Bn USD. In the 5 years since inception, it’s returned 21% to investors. It is the largest money market fund in the world with 20% of the value of all money market funds in China.\r\nY: It’s so big that it was creating anxiety for the Chinese government. Since there are no restrictions on withdrawing money, Yu'e Bao’s massive scale could mean that if there is some kind of adverse event and users decided to withdraw money en masse … that it would most definitely tank the market, maybe even creating further panic.\r\n\r\n[12:29] R: The central bank had thought of this as a risk from the beginning, and the government stepped in at the end of 2016 with new regulations. Pretty soon after, Yu'e Bao accounts were restricted to balances of 250K RMB or about 38K USD. A few months later, that was further reduced to 15K USD. By December 2017, individuals were restricted to investing a max of $3K per day.\r\nY: That didn’t fully do the trick because a systemwide limit per day was then imposed in February of this year. This meant that the entire fund would only accept a certain amount of new investment per day, and new deposits would be disabled when the quota was reached for that day.\r\n\r\n[13:15] R: For many people it came to mean that the first thing they do in the morning at 9am when the deposit window opened is to put in whatever spare cash they have in their Alipay into Yu'e Bao, before the quota was filled. That’s how important this product was to them.\r\nY: Rough. But dedicated money savers can rejoice. In May, Yu'e Bao added two new money market funds, both of which are unrestricted, and both of which are offering similar-ish rates to the core Tianhong product but have just a few Bn in AUM. It will be interesting to see where they end up at the end of the quarter, and whether or not they grow to be as big as the Tianhong flagship fund.\r\n\r\n[14:00] R: But is what Yu'e Bao has accomplished that innovative?\r\nY: It was definitely innovative but it wasn’t that innovative. Paypal had actually done the same, for those of you listening who are old enough to remember. Paypal closed the service down in 2011 however, because well, they were only managing half a billion dollars and it was operating at a loss. I mean, by the time it closed consumers were on track to get less than 0.1% for the entire year, so I don’t think anyone shed too many tears.\r\nSo even though Yu’e Bao is cool, it probably couldn’t have worked in the US interest rate environment.\r\n\r\n[14:37] Y: Enough on Yu'e Bao … what about Sesame Credit (芝麻信用)?\r\nR: Before we go into that, I just want to briefly comment on the traditional consumer financial system in China. Basically, it sucks, a lot. When I arrived in China in 2007 to get a credit card, China Construction Bank didn’t just ask me to fill out my wage information, it made me get a notarized letter from HR explaining my title, the duration of my contract, and my salary. It was such a hassle. Conclusion: getting any kind of credit was a pain in the butt.\r\nY: But Ant, armed with all this data on the payment habits of its decade long relationship with hundreds of millions of Alipay users, was uniquely positioned to come up with a credit scoring system.\r\n\r\n[15:31] R: Alibaba and his forty thieves had found their treasure - Open sesame.\r\nY: That’s right, Zhima (芝麻), which means sesame, was launched in 2015 after receiving one of the 8 credit scoring licenses given out by the Chinese government.\r\nR: You can find many stories online of how important a user’s sesame score is. For example, I just checked and I have a score of 578, which is not very good, it’s actually pretty bad, because I don’t use Alipay really and because I didn’t bind any other information to it, such as any property holdings, cars, or bank accounts.\r\n\r\n[16:07] Y: The higher the score you have, the more benefits you get. They range from small things like not having to pay a deposit for your bike sharing, car rental, to bigger things like your apartment deposit.\r\nR: Of course, in addition to scoring credit, this means now Ant can be a confident lender. Which it does, and has completed about $50Bn of loans so far. It also issued, by the way, $40B worth of consumer-loan-backed securities in 2017. OK, so to summarize, now we have covered three of Ant’s most visible businesses. Alipay, Yu’e Bao and Zhima credit.\r\nY: We’re more interested in discussing today not what Ant has already done, but what it’s looking to do in the future and things that could, or are already, tripping it up.\r\n\r\n[17:06] R: The first is social networking. Ant loves social networking. Ant invested in MOMO, the dating and livestreaming app, and tried to clone Wechat with a product called 来往, or back-and-forth, but it didn’t get any traction. It did do an enterprise chat product called Dingding that’s basically a slack clone that seems to be working OK, but that’s hardly real social networking.\r\nY: Why does it keep on trying to get into social networking though? Because most people believe a pure transactional platform doesn’t have staying power. Alipay used to have something like 80% market share in China. After the launch of Wechat, it’s lost 30% to Tencent and the gap seems to be narrowing.\r\nR: When it banned links to Taobao from Wechat, that was almost one of the stupidest things it could do, because it literally just made WeChat shops much more popular.\r\nY: But it just keeps on trying. At the end of 2016, it made some really bad decisions in the form of products called Campus Diaries and White Collar Diaries.\r\nR: I have no idea who greenlit these products, but basically only females could post profiles, and users with a high Sesame credit score could comment; others, such as myself, could only tip the profiles with Alipay and not comment. Now I have no idea who would want to do either, but what happened was that profiles turned pornographic pretty quickly.\r\n\r\n[18:34] Y: Don’t forget the VIP groups for “pretty and rich” people, ie where the app literally scans your face, determines if you are good looking enough, and looks at your credit score before allowing you to join the group. The diaries were a huge scandal and Ant had to apologize publicly.\r\nR: Sounds like a Black Mirror episode, doesn’t it? And it reminds me of Didi’s Hitch product gone bad back in our episode 6, but at least here no one died. Anyway the point is, Ant hasn’t cracked social and its first place lead in payments may be more precarious than we think.\r\n\r\n[19:09] Y: The second risk is much more serious. As we have alluded to above, there’s been increasing regulatory hurdles for consumer finance in general, as the Chinese government gets wiser about policing risk. Financial risk, that is.\r\nR: Ant has 3 revenue streams, payments, financial services, and technical services. In 2016, Payments was the largest at about 70% of the revenue, and the other two at 15% or so each. By 2017 that had changed with payments decreasing to 54%, technical services going up to 34%, and financial services dropping to 11%.\r\n\r\n[19:49] Y: But the biggest changes are yet to come. Ant announced last month that by 2021, it expects that services will comprise 65% of revenue, followed by payments at 28% and financial services at a negligible 6%. That’s a huge shift in revenue mix over the next few years. The payments and technical services businesses are basically swapping places. Can such a large company, with 870mm active users-- aka twice the size of the US -- and 15mm small business users, make such a rapid pivot?\r\nR: Some experts in China think Ant has no choice. It’s not a state-owned enterprise and it’s not a commercial bank. They think that its finance business will be capped. Better to stick with tech.\r\nY: Right, offer technical solutions to finance companies instead. But Ant has a consumer background. Think about the products we highlighted in detail today. Those are all consumer-facing products.\r\nR: Or you could think of them as algorithms and data. Solutions that can be sold to other tech-hungry firms. And Ant has indeed been positioning itself as a strong data and analytics company for the past several years.\r\n\r\n[21:03] Y: Before we tell you what we think, we asked a notable fintech VC in China what he thought. We have Wayne Shiong here with us today.\r\nW: “Hi there, my name is Wayne Shiong at China Growth Capital. We started with fintech in 2006 and we have around close to 40 fintech companies in China. We are also one of the first into crypto investing with a portfolio like Ripple Labs. In China we cover robo-advisers to anti-fraud detection to cloud services, all sort of fintech companies.”\r\n\r\n[21:33] Wayne’s opinion on Ant’s valuation and his overall assessment of the company:\r\nW: “I think it’s market recognition with a lot of big names in the round. I think that it’s strong evidence that Alibaba e-commerce business has started to level off and they have to rely on some other business lines to keep the growth momentum. Ant Financial has been doing really well in attracting Chinese users and becoming the default robo-advisor type of service in China and definitely the default payment tool company. I think its weakness is on the international side, so if you travel abroad, if you’re in the US and Europe or Japan there’s still very little penetration for Alipay.” \r\n\r\n[22:16] Y: Wayne’s comment on whether Ant Financial is going to be bigger than Alibaba itself:\r\n“I would agree that Ant Financial is definitely going to be more valuable than the overall Alibaba group. I think the key reason being that if you look at the retail space then it’s very competitive, and it doesn’t have a regulatory threshold or entry barrier for other people to march into the space. And also it faces strong competition from JD and a few others in the market. But if you look at the financial services area, whether from a consumer perspective or an SME perspective, then Ant Financial is in a perfect position to defend. “\r\n\r\n[23:11] R: One last point before we come to our conclusion. In Q1 2018, Ant disclosed net losses of 114mm, which some people took as negative news.\r\nY: I think it’s natural that Ant is incurring losses. It’s still growing rapidly, after all. It’s been aggressively expanding overseas, for example, cultivating international markets along with the One Belt One Road initiative from the Chinese government. And on that technology service front? In the past 3 years, it’s exported its technology overseas to 9 countries along the Belt.\r\n\r\n[23:53] R: It’s also extended coverage of Alipay to 40 countries now covering 27 currencies. It’s investing abroad as well, it now owns stakes of India’s Paytm, Korea’s KakaoPay, etc. So does that mean we think Ant is going to be bigger? Than Alibaba?\r\nY: I think so. But there’s a lot of risk.\r\nR: Well we will see, maybe in 3 years we will be doing the largest IPO, Ant financial.\r\n\r\n[25:10] Tune in to our partners SupChina & the GGV 996 podcast, which interviews top tech leaders in China tech and investment.\r\n\r\nTechBuzz China by Pandaily is powered by the Sinica Podcast Network. Pandaily.com is a new English language site that tells you “everything about China’s innovation.” Our producers are Carol Yin and Kaiser Kuo. Our intern is Ska Du.\r\n\r\nFollow us on twitter, at @thepandaily, @techbuzzchina, @ruima and @ginyginy.","publishedDate","2018-06-27T10:34:42.000Z","featured",false,"viewCount",0,"readingTime",21,"status","draft","language","en","featuredImage","featuredImageUrl","http://pandaily.com/wp-content/uploads/2018/06/Podcast-pic-Pandaily（2000_1041）-1.png","categories",[38],{"_11":39,"_40":41,"_15":42,"_43":44,"_45":46},"akkgow3qzxkicnhnit6loy27","name","Podcast","podcast","color","#000000","description","","tags",[49,54,58,62,64,68,72],{"_11":50,"_40":51,"_15":52,"_43":53,"_45":46},"d93dhsf37ni748u8e3l4tsbt","Alibaba","alibaba","#6366f1",{"_11":55,"_40":56,"_15":57,"_43":53,"_45":46},"ofb3mdijqj3odp62ppsf9bc8","Ant Financial","ant-financial",{"_11":59,"_40":60,"_15":61,"_43":53,"_45":46},"eqtqbng5tqm9n9lxkw51xg3d","Unicorn","unicorn",{"_11":63,"_40":41,"_15":42,"_43":53,"_45":46},"uaphx43y0giargy7a65am05b",{"_11":65,"_40":66,"_15":67,"_43":53,"_45":46},"clwyyzz2ww68opgd5i45hezu","Rui Ma","rui-ma",{"_11":69,"_40":70,"_15":71,"_43":53,"_45":46},"pzkmx0s22yduw85iaxtckbk8","Ying Lu","ying-lu",{"_11":73,"_40":74,"_15":75,"_43":53,"_45":46},"agka16w1iqfap0n0rf9fb758","TechBuzz China","techbuzz-china","createdAt","2025-06-24T22:35:44.777Z","updatedAt","2025-06-24T23:44:35.379Z","publishedAt","2025-06-24T23:44:35.445Z","locale","pagination",{"_85":86,"_87":88,"_89":86,"_90":91},"page",6,"pageSize",12,"pageCount","total",61,"currentPage","tag","tagSlug","actionData","errors"]

Tag: #Ant Financial

Ep. 11: After Alibaba, Team Jack Ma’s Newest Centacorn: Ant Financial