Bloomberg: Hu Xiaoming accelerates Alipay change to “take food” from Tencent

Beijing time on June 29 morning news, according tomedia reports, billionaire Jack Ma’s new boss is accelerating the transformation of Alipay into an online shopping mall that includes loans, to travel to takeaway distribution, in order to take back users from Tencent. Ant Group’s Hu Xiaoming is aggressively marketing its digital payments and cloud services products to KFC and Marriott’s local branches, and Ant hopes to expand its focus from banks and fund managers to other locations to make their services ubiquitous.

Hu Xiaoming

Ants adopt a two-pronged strategy. First, they have prevented the huge success of Tencent and takeaway giant Meituan Dianping, both of which have previously managed to attract merchants to their platforms. China Mobile’s payment stake is $29 trillion, and Ant Financial is a leader in the sector. Second, it has also made Ant’s business more diversified, putting them in a less sensitive area. The move comes after it came under scrutiny from regulators for its massive expansion of its products in the financial services sector.

In his first interview withmedia since becoming ant financial CEO in December, Mr Hu said: “We want to help the service industry and digitalite it.” We have been pursuing a strategy to develop Ant into a technology company, and we have been pursuing a platform development strategy for many years. “

Hu Xiaoming doesn’t want users to see Alipay as a niche financial service provider, or a payment portal for the world’s largest e-commerce platform, and he wants to make Alipay an application that meets the needs of people, from buying food to managing money, booking hotels to loan applications, and when users have these needs, they can think of Alipay for the first time. He also wants to sell technology solutions such as artificial intelligence, blockchain and risk control to companies that use the platform.

His goal is to get more than 80 per cent of Ant’s revenue sourcing from local merchants and financial companies over the next five years (about half more than at the end of 2019). As a result, the contribution from Ant’s own money market funds and proprietary services such as loans will be reduced.

“As a financial platform, we want to share the technology and resources we develop with more finance, local services, public services and businesses from other countries,” he said. He said the shift would not hinder IPO plans and that the company remained open to listings, but declined to say when it would be scheduled.

In an effort to make the change, the company changed its name from “Ant Financial Services Group” to “Ant Group Co.” Alibaba owns 33% of Ant.

Unusual positioning

Although Ant has 900 million users, its focus on day-to-day consumer services puts ant in an unusually weak position. Although Alipay still controls more than half of China’s mobile transactions, It has failed to take the lead in so-called small programs. The mini-program was an innovation led by Tencent three years ago.

With the small app, Tencent’s game and social media giant has more than 100 service providers on its WeChat platform, and 400 million users use the app every day to unlock shared bikes, book movie tickets and even buy apartments. The popularity of small apps has also brought more mobile payment and advertising revenue to Tencent.

Mr Hu’s main task now is to compete with companies such as Tencent. In addition to Tencent, companies such as American Group and Express have entered the field, hoping to take a slice of e-commerce and payments and invade Alibaba’s ecosystem.

Mark Tanner, founder of Shanghai-based China Skinny, a research and marketing company, said: “Ant and Alibaba are currently fighting companies that have not even had a business in payments and e-commerce before. “

Personalized content

Mr Hu said Alipay platforms had some natural advantages that allowed them to regain lost ground. Users can customize Alipay’s interface to the top of the commonly used features. The company plans to use algorithms to further enhance the customized experience of the login page.

After two years of development, Ant now has two million small programs, with about 600 million monthly users. Mr. Hu did not disclose the company’s expansion forecasts.

For the first time since its launch, Alipay has raised the importance of local services to the same level as financial services. It will be hungry and the flying pig has moved to the first page of Alipay. Mr Hu said Alipay would also improve the search service experience, making it easier for users to find small programs that provide local services.

“Alipay is combining the benefits of super applications with the benefits of small programs,” he said. Users can access services faster than WeChat platforms. “

The effects of these efforts are now emerging. Alipay’s mobile payment market share has grown for three quarters in a row, reaching 55.1 percent in the fourth quarter, according to iResearch, a research consultancy. At the same time, Tencent’s market share was 38.9%.

Mr. Hu joined Alibaba in 2005 after working for China Construction Bank, the country’s second-largest lender. Over the years, he has built a reputation for introducing innovations such as using data analytics to provide mortgage-free financing for small businesses and helping Alibaba beat Amazon to build Asia’s largest cloud business.

Michael Norris, a Shanghai-based consultancy, says Mr. Hu’s experience will help Ant target small businesses looking to digitize the consumer services sector.

Analysts at Goldman Sachs said Ant’s flower slot is expected to help banks lend Rmb2, 000bn ($283m) of consumer loans by 2021. Ant is the largest shareholder in online banking, which had helped banks lend Rmb600bn to 10m small and medium-sized businesses by the end of May.

So far, mr. Hu said, the company’s risk control performance has been good. Before the outbreak, the bad debt rate of The Flower and Net-a-Porter bank was about 1.5%, but it rose to about 2% after the outbreak. By contrast, Fitch Ratings estimates that the non-performing loan ratio of Chinese banks could rise by 2 per cent to 3.5 per cent in the first quarter of last year.

“After the outbreak of the coronavirus, the non-performing loan rate of our small and medium-sized enterprises and young people’s lenders has increased slightly, ” Hu said. He also noted that the bad debt rate is expected to fall to pre-epidemic levels by March next year.