Jack Ma’s new boss lays out plan to fend off Tencent

Billionaire Jack Ma’s newest boss is accelerating Alipay’s evolution into an online mall for everything from loans and travel services to food delivery, in a bid to win back shoppers lost to Tencent Holdings.

Ant Group Chief Executive Simon Hu is aggressively rolling out cloud and digital payments offerings to local branches of KFC Holding and Marriott International, broadening the company’s focus from banks and fund managers on its ubiquitous app.

The strategy of the subsidiary of the Alibaba Group has two aspects. It halts the runaway success of Tencent and food delivery giant Meituan Dianping in attracting local merchants to their platforms, eroding Ant’s dominance in China’s $29bn mobile payments space. It also diversifies Ant’s business into less sensitive areas after the company drew regulatory scrutiny for its breakneck expansion into financial services with in-house products.

“We want to help digitize the service industry,” Hu said in his first interview with foreign media since taking over as CEO in December. “We have been following the strategy of turning Ant into a technology company, with an open platform strategy for many years.”

Hu wants users to think of Alipay not as a niche financial services provider and payment gateway for the world’s largest e-commerce platform, but as the go-to app for a wide range of needs, from groceries to wealth management and hotel booking. to loan applications. Its goal is to simultaneously sell technology solutions such as artificial intelligence, blockchain, and risk control to companies that use the platform.

His goal is for more than 80% of Ant’s revenue to come from local merchants and financial firms in five years, up from about half at the end of 2019. shrink as a result.


“We want to share the technology and resources that we have developed as an online financial platform with more companies in finance, local services, utilities and other countries,” he said. The change does not hamper any IPO plans and the company is still open for listing, she said, declining to provide a time frame.

To mark the transformation, Ant changed its registered name to Ant Group from Ant Financial Services Group in late May. Alibaba owns a 33% stake in Ant.

The focus on everyday consumer services puts Ant in the unusual position of underdog, despite its reach into the spending patterns of 900 million users. While Alipay still controls more than half of all mobile transactions in China, it was a latecomer to so-called mini-programs, an innovation championed by Tencent three years ago.

The lightweight apps have enabled the gaming and social media giant to host more than a million service providers in its WeChat environment, with 400 million users a day logging in to rent bikes, order food, choose movie seats. and even buy apartments through a single interface. . Its popularity has increased Tencent’s share of mobile payments and advertising revenue.

Hu’s most important task has been fending off competition from the likes of Tencent. But companies like Meituan and live streaming site Kuaishou have risen to the challenge, encroaching on Alibaba’s vast ecosystem, undermining e-commerce and payments.

“Ant and Alibaba are fighting companies that traditionally don’t even operate in their e-commerce and payments fields,” said Mark Tanner, founder of Shanghai-based research and marketing company China Skinny.

The Alipay platform offers some natural advantages to make up lost ground, Hu said. Its interface allows users to customize and pin frequently used services, and the company plans to use algorithms to further customize the Alipay landing page.

Ant currently has about 600 million monthly users for its 2 million mini-shows after two years. Hu did not provide a forecast for its expansion.

For the first time, the app has elevated local neighborhood services to the same level as its finance vertical. It moved services like Ele.me and Fliggy, Alibaba’s travel and food delivery units, to the front page of Alipay. Alipay will also improve the importance of its search function, so that people can find the mini-programs of local services more easily, Hu said.

“Alipay is interweaving the advantages of a super app with that of mini programs, users can have faster access to services through our platform compared to WeChat,” he said.

Such efforts are paying off. Alipay’s share of mobile payments has increased for three consecutive quarters, reaching 55.1% in the fourth quarter, according to research consultancy iResearch. Tencent has 38.9% of the market.

Hu, who joined Alibaba in 2005 after working at China’s second-biggest lender, China Construction Bank, has earned a reputation for implementing new innovations, such as using data analytics to offer unsecured financing services to small businesses. companies and help Alibaba beat Amazon.com. to build the largest cloud business in Asia.

His experience will help Ant target small companies in the consumer services sector looking to go digital, said Michael Norris, a research and strategy manager at Shanghai-based consultancy AgencyChina.

Hu must also weather Ant through a coronavirus-induced economic downturn, which will test the resilience of the loan portfolio he has built over the past decade alongside some 200 partner banks in China.

Su Huabei, which means “just spend,” is on track to help banks issue 2 trillion yuan ($283 billion) in consumer loans by 2021, according to analysts at Goldman Sachs. Online lender MYbank, where Ant is the largest shareholder, has helped banks issue 600 billion yuan of credit to 10 million small and medium-sized businesses by the end of May.

So far, the company’s risk controls have been maintained, Hu said. The bad loan ratio for Huabei and MYbank rose to around 2% from around 1.5% before the virus outbreak, the company said. By comparison, Fitch Ratings estimates that Chinese banks’ delinquency ratio may rise 2 percentage points to 3.5% compared to the first half of last year.

“We have seen a slight uptick in non-performing loans among our SMEs and young credit borrowers post-Covid,” Hu said, adding that he expects the bad loan ratio to drop to pre-Covid levels by March next year.

In addition to easy loans, Ant also wants to introduce wealth management options to the 600 million users of its Yu’e Bao money market fund platform.

It will cross-sell products such as equity- and bond-backed investments offered by banks and work with more foreign asset managers to provide advisory services, similar to an established venture with Vanguard Group. Vanguard’s robotic advisor has attracted 100,000 people since its launch in April.

“What we have always pursued is an open platform strategy, so we will definitely work with more partners in the future,” Hu said.

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