Jack Ma turned China's Money Supermarket into a 200 billion company

Jack Ma turned China's Money Supermarket into a  200 billion company

Sixteen years ago, Jack Mae introduced a small payment service to strengthen his online shopping empire. Only a few expected it to succeed.

Now this service has become the backbone of Ant Group. The payment system is now the 200 billion property of Ant Group. Jack Ma, the founder, believes that small things are beautiful and powerful, so the group is named Ant.

Ant Group is a small business entity in China. Ant Group is currently preparing to issue its public shares in Hong Kong and Shanghai.

With this IPO issuance, Jack Ma will issue the second-largest IPO ever. "Ant Group is a goldmine for Jack Ma and for China's Internet industry," said Edith Young, general partner at Race Capital.

Ant Group is one of the world's largest technology companies and China's largest online payment platform. The app is present in all aspects of China's financial life.

It has a presence in everything from investment accounts and micro-savings products to insurance, credit scores, and dating profiles. But initially, it was started as a side project to look for opportunities in the future of China's potential online shopping industry.

By 2004, few people had debit and credit cards. At the time, buyers and sellers using Alibaba's Baba eCommerce platform needed a reliable payment system to complete payments.

Jack Ma assigned Alibaba's finance team the task of making Ali Pay. The service acts as a trusted third party. It holds buyers' money in escrow and deposits money into the seller's account only after the goods have been purchased and both parties are satisfied.

‘When I started Ali Pay, this is the stupidest model we’ve ever seen in Jack. No one used it, "Jack Ma told CBS News in 2014.

"I don't care if it's scientific or fancy. That's what I said. But as long as it works, it will help build trust, ”he said.

Money supermarket

But just as it worked. Today, Ali Peka has 711 million monthly active users. Ant Group reported in its regulatory filing that it had paid 1.18 trillion yuan in 12 months.

The Alipay mobile app, launched in 2009, accounted for 55 percent of China's mobile payment market in the first three months of this year.

Emarketer, a market research firm, has shown that Tencent's TCEHY WeChat Pay and QQ Wallet account for 40 percent of the turnover. This app has connected millions of people to financial services.

Ali Peka users can select and browse insurance products, as well as pay bills, get loans, pay employees, and invest in the money market.

Young compares it to a financial supermarket. He says everything for the financial market can be done from Ali Pay.

Alipay split from Alibaba in 2011 as a separate entity and became part of the Ant Group in 2014. According to regulatory filings, Jack Ma launched the world's largest IPO of Alibaba for the first time in 2014.

Ant now offers a wide range of financial services and goods. It has now become a part of daily life for millions of people and business companies across China, says Jennon Capron, founder of Capronasia, a financial technology consulting and research company.

"It's hard to increase the company's influence on the Chinese people," he says. In 2013, Ant Group launched Yui Bao, a well-known asset management service company.

From there, users could invest the money saved in their wallets. The smallest amount to invest was up to one yuan. In the six months since its inception, Yu Bao has raised 49 million users and collected 250 billion yuan, according to the state-run China Daily.

According to the newspaper, most of the traditional banks providing asset management services had set a threshold of at least 50,000 yuan for savings. This is why Yu Bao immediately became popular. Especially among those young people, whose small money was ignored by the banks.

In 2018, Yu Bao reached his peak. At the time, his fortune reached 1.6 trillion yuan, according to Fitch Ratings. At the time, Chinese regulators were pressuring Yu Bao to hide assets, citing systemic risks.

He warned that if such a large sum of money failed to justify its accumulation, it could cause great damage to the Chinese economy. But it is still China's largest money market fund. According to Fitch Ratings, its fund reached 1.26 trillion yuan in March this year.

Ali Pay and Ante Ecosystem have really empowered many people and small businesses to borrow money and make online payments.

Large repository of data

Hundreds of millions of people are using Ali Peko's financial services today. So today Ant Group has a wealth of incomparable and valuable data on the nature of the Chinese consumer.

Unlike the United States, China does not have a reliable credit scoring system. To fill that gap, Ante launched Sesame Credit in 2015.

Ant Group defined Sesame Credit as a 'trust score'. It was a method of assessing how much business and consumers are willing to pay for goods and bookings for services, and how capacity-friendly it is.

Yung says it has the largest credit rating system in China. But it was also used for things other than getting a loan rate.

"I've seen sesame scores used for online dating. You could make your credit score displayable on your dating profile, 'says Young.

People used to share Sesame scores on Chinese social media to demonstrate their purchasing power. People with low scores would log out of the service and stop buying goods.

Chinese courts began sharing Ant's list to identify people who did not pay their debts. A few years later, Ant Group used its data to reduce the Sesame score to punish 1.2 million people who went into debt and banned the sale and purchase of goods using Ali Pay.

As many as 126,000 people have paid off their debts since Ant's move, according to Xinhua.

In 2018, Ant also apologized to Ali Pay for misleading Ali Pay users to increase its Sesame Credit user base.

Ant had unveiled a new service. From which users can find out how much Ali Pay has been used in the past year. But there was a box on the landing page of that report, which was checked by default.

"People have agreed to use Sesame Credit," Xinhua said. This made the users very sad.

This is because users are being given automatic system licenses to store their data. Those data analyzes were shared with partner organizations. For that, Ant apologized and changed the default option to the unchecked box.

Everything in technology

Last year, Ant Financial changed its name to Ant Group. Because he wanted to restructure himself. In the past, Ant provided loans, investments, and insurance products to consumers and companies.

But in the last few years, Ant has transformed itself into a platform that charges banks and insurance companies for connecting with potential customers, writes market research firm R3's researcher Sunny Tian.

As a leading platform, Ant offers 'Three-One-Zero Service'. Which means three minutes to apply, one second to make a credit decision, and zero people involved in the decision.

But the loan has syndicated out mainstream banks. The loan stays in the bank's book and a fee is also charged. ‘Ant’s move has diverted him from the path of displacing mainstream financial companies. And he's got it rooted in his own business as a less capital intensive technology business. '

Ant also made Bangnitau public. This is an AI-based investment advisory service. For this, he had partnered with Vanguard. Bangnitau means 'investment support'.

It used some such algorithms, with the help of which it automatically reallocates investment portfolios. The minimum investment is 800 yuan. The product, which went public in April, has already generated 200,000 new customers in three months.