Day-to-day business and personal transactions on digital wallets naturally generate excess cash balances. Could there be a solution that uses this opportunity to provide financial saving options for people?
When it began in June 2013, it would have been hard to imagine that an add-on service offered by an ecommerce company would be a serious contender to established players in investment and wealth management. By May 2017, a little under four years since its inception, Yu’E Bao (Chinese for “leftover treasures”) – an investment product offered by Alibaba’s affiliate Ant Financial – became the world’s largest money market fund, leaving behind JP Morgan Chase’s US Government market fund (US$150 billion in Assets Under Management (AUM)). As of February this year, the fund manages US$251 billion, much of it drawn from the spare money lying in the digital wallets of close to 370 million active account users – ranging from small businesses to salaried individuals under 40, for many of whom digital payments are the primary mode of financial transactions.
Ant Financial’s wealth management platform Ant Fortune said it has teamed up with 80 asset management firms to deploy its artificial intelligence-powered capability to offer tailor-made wealth management service. Huang Hao, president of Digital Finance Business Group at Ant Financial, said that the wealth management products and investment service will not be limited to high-net-worth investors and portfolio managers. “We want to use technology to support asset management companies to come up with tailored products and make services more accessible to ordinary users, through better user connectivity and smart marketing,” he noted.
It will combine financial know-how, algorithm and user behaviour analysis to help brokerages, fund companies and private equity firms and insurers to better target potential investors through Ant’s platform. The Yu’E Bao money market fund, offered by Tianhong Asset Management, now has 600 million users, who use it as a handy cash-management tool through Ant’s popular mobile wallet Alipay. Ant Fortune hopes wealth management firms will better leverage these users’ payment and investment preferences to expand their presence and attract more investors.
Yu’E Bao, by Alibaba, is world’s largest money market fund today. With USD251 billion in assets under management as of February 2019, it is hard to believe that an affiliate product from an ecommerce company could disrupt investment management.
Alibaba was in the unique position of having information on buying habits, cash flows, and creditworthiness of over 400 million active users of its service. Secondly, with massive upgrades in the country’s telecom infrastructure, the cost of purchasing a smartphone and maintaining a data pack was coming down. Between 2010 and 2013, the cost of a 2GB roaming data pack fell from about US$36 to US$17, (a commensurate US data pack costs about U$20). And finally, the escrow service that Alibaba had pioneered in 2003, where the buyer’s money was kept in a safe account until he received goods from a seller in another part of the country and was satisfied with it, had been a great enabler of building trust in ecommerce in general and the brand in particular. As the company diversified into multiple life services – movie booking, travel, sports etc. – more and more people and businesses were comfortable keeping spare cash in digital wallets, given the ease of using the platform to spend on consumer goods and services. These three factors put Alibaba in a powerful position to capitalise on the interest rate liberalisation that the Chinese government was embarking on, to improve resource allocation in the economy.
Some 40 companies, which began using the Ant Fortune platform two years ago to curate and publish their own financial and wealth management-related content and interact with investors, have seen an improvement in the volume of user transactions as well as operational efficiency.
By June this year, asset management companies had recorded an average 70 percent growth in the number of transacting users since they opened their accounts on Ant Fortune. More than 100 asset management companies are offering over 4,000 wealth management products on Ant Fortune. A virtual assistant will also be available for Alipay users to assess their own risk awareness and optimize their investment strategy, and Ant expects it to become an industry-wide application that will be used by more companies and organisations.
