From Alibaba to Jinri Toutiao, the top 20 Chinese Internet companies have begun developing new business strategies, to try and monetise traffic by introducing consumption-based financial services, like loans.
These unicorns are progressively shifting their focus to a collaborative business model with registered financial organisations to monetise traffic, tide over fund constraints or just generate an added corpus of revenue.
Partnering with financial organisations, they form a two-layered system where the Internet companies lure traffic with their content and comprise the front-layer, leaving the risk management to be dealt with by the financial organisations, which comprises the second layer.
Ant Financial, Tencent, Baidu, and JD.com, who have already been into the financial business, used to employ the earlier model because fintech being a relatively new phenomenon at that time, licensed financial firms distrusted the partnership with Internet-based companies.
However, even those pioneers have shifted their stance recently.
According to 36kr.com, Ant Financial, Alibaba Group affiliate, has collaborated with other ventures to offer on personal and small retailers’ loan. JD Finance and Baidu’s Du Xiaoman Financial have thoroughly transformed into fintech technology providers, keeping themselves away from the financial part of the process.
We take a look at some more recent examples of this new and growing trend:
Toutiao’s “Fangxindai” and “Jinri Games”
Jinri Toutiao, the Beijing-based information aggregation platform app of ByteDance, has recently developed its first financial business - “Fangxindai”, a technology-based platform that provides personal loan services to customers.
It uses a complex algorithm and AI to determine users’ preference and recommend their service plans.
Licensed financial firms that cooperate with Toutiao include BOC Customer Finance, Bank Of Nanjing, and XWBank.
Analysts had started picking up hints about Toutiao’s intention to venture into the financial market a year ago.
In August 2017, Toutiao announced several vacancies for finance professionals in leading job sites in the country. Proficiency in dealing with small cash loans was earmarked as a prerequisite for the jobs.
In January 2018, as Toutiao was acquiring 100% equity of online payment platform Wuhan Hezhong Yibao, word spread that the information content provider had managed to obtain the Third-Party Payment Licenses in China.
From the middle of June, a large number of Toutiao’s users were able to find an option called “Fangxindai” under “My Wallet” section, which offers customers loans up to CNY 200,000 (USD 30,000) against a 0.03% daily interest rate.
Toutiao’s business model is quite obvious: Toutiao will attract users through its traffic and data strengths, whereas the back-end services, like risk management, lending, and payment, are operated by licensed financial films.
In addition to financial business, Toutiao’s new service “Jinri Games” launched on June 14, is an attempt at traffic monetization.
The information platform China Film Insider has revealed that Jinri Games will generate revenue through in-game purchases from the engaging game-centric content and live streaming videos that Toutiao will use as bait to lure footfall.
For most giant platforms, financial business, particularly the lending service, is an effective means to turn traffic into profit.
Similar to Toutiao’s Fangxindai, Didi, a major Chinese ride-sharing, AI and autonomous technology conglomerate, released an online lending product, “Dishuidai”, in April 2018.
Dishuidai will provide users up to CNY 300,000 (USD 45 thousand) and allow a payday loan.
It defeats Didi’s previous financial services, such as balance management, insurance, and financial lease, coming to be the first one that helps the company to win considerable profit through traffic monetization.
A loan supermarket from ofo
The world's first and largest station-free bike sharing platform and mobile app, ofo, implemented a similar but simpler financial program to tide over a funding crisis.
It only functions as a third-party lending platform like a loan supermarket in which users can borrow CNY 1,000 to CNY 100,000.
Its partners include four P2P (peer to peer) lending platforms - 9f Group, Renrendai, Xiaohuaqianbao, and Lakala Payment.
Cooperation is the key
Branching into financial business, especially loan services, tend to be an irreversible trend for Chinese giants.
Besides pioneers such as Alibaba, Tencent, JD.com, Baidu, Meituan, Didi, Xiaomi, 58, and Vipshop, most platforms have set consumption-based financial services into their agenda, according to the news website 36kr.com.
The trend doesn’t seem to be limited to China alone. Read an earlier report by The Passage that tracks Indian e-commerce websites working in tandem with financial institutions to cash in on the digital lending boon sweeping through India: