As the online financial services market in China heats up, traditional joint venture or local financial services providers are eager to seek an expedited path to move online too. Here the author tries to explore a viable strategy from the empowering technology perspective for those financial services firms.
3. China Mainstream Urban Income Structure
Courtesy
of
McKinsey
Inc.
Chinese mainstream income ratio will grow into 51% by 2020
4. Enterprise Asset Management Market Outlook
3.44 million private enterprise units
in 2013 with
51,830 large size units
(>¥10 million registered capital)
and
84,620 medium size units
(¥5 to $10 million registered capital)
¥4.214 trillion
in registered capital
7. Challenges from Burgeoning Online Players
Baidu’s Baidu BaiFa
§ Launched on October, 2013
§ Partnered with China AMC
Tencent WeChat United Fund
§ Launched on December 2013
§ Partnered with China AMC, E FM,
GF FM, and China Universal AM
Alibaba YuErBao
§ Launched on June, 2013
§ Partnered with Tianhong AM
NetEase TianJin
§ Launched on December, 2013
§ Partnered with Tianjin
Jingdong网银在线 to be launched
8. Online New Player’s SWOT Analysis
Strength
§ Huge user base
§ High brand awareness
§ Fully self-service
§ Successful partnership with AM/FMCs
Opportunities
§ Competing with banks once the
licenses are granted
§ First move advantage
§ Technology power houses
Weakness
§ Simple product offerings hard to
meet sophisticated users’ needs
§ Guaranteed high return offerings are
more like marketing gimmick
Threat
§ Government policy shift
§ Conventional WM/AM/FM firms going
online too
§ Partnership goes wrong
9. Challenges for Sustainable Growth
Technology Challenge
§ Lack of deep online experience
§ Underutilized big data asset
§ Low agility to business changes
Business Challenges
§ Overly customized portfolios
§ Lack of reach to online users
§ Expected to play a truly independent
3rd party role
Resource Challenges
§ Hard to hire and retain top sales and
wealth managers
§ Labor cost is proportional to growth
Process Challenges
§ Lack of process maturity
§ Processes and workflows are not
fully integrated with other enterprise
applications
10. Strategy to Transform from Off-line to Online
Step 1. Set a High Bar for New Online Business
Step 2. Think from a fresh business perspective
Step 3. Focusing online
Step 4. Strategizing
Step 5. Implementing the strategy
11. 1. Set a High Bar for New Online Business
Technology Positioning
§ Agile to business needs
§ Cloud based to provide SAAS/PAAS
§ Big Data for business analytics
§ Scalable to support huge user base
§ High performance
§ High security
§ Adaptable for oversea expansion
Business Positioning
§ To become the market leader in the
targeted user segmentation
§ Organizational transformation and
alignment to improve efficiency
§ Elevate the capability maturity in
process management
§ Improve the customer satisfaction
From off-line to online is a business transformation rather than
a UI makeover
12. Technology to Serve the Business
HNWI
Online
Subscriber
Reseller
Online
Partner
Private
Enterprise
14. 2. Think from a Fresh Business Perspective
AM Customer
Deep Penetration
§ Self-service
WM as
employee
benefit
Retain Biz-owner
§ Single view of
multiple accounts
Customer
Satisfaction
§ Attract
young
HNWI
Aggressively Acquire
Mainstream Income
Customers
§ WM Self-service
Brand and Service
Awareness to Vast
Online users
§ Through
partnership
15. 3. Understand the servicing targets
URE 19. HNWI Preference for Direct Contact vs. Digital Contact by Age Band, Q1 2013
Age 60+
Age 50-59
Age 40-49
Under 40
Global30.7%
20.2%
24.0%
32.0%
38.2%
23.7%
29.1%
24.8%
22.9%
21.7%
Direct Contact Digital Contact
FIGURE 19. HNWI Preference for Direct Contact vs. Digital Contact by Age Band, Q1 2013
(% Respondents)
Question asked on a 10-point spectrum: Please indicate whether direct and personal contact is more important to you than digital contact (internet, mobile, email)
gital contact (internet, mobile, email) more important to you than direct and personal contact?
Courtesy
of
Cap
Gemini
Young wealthy generation prefers digital contact
16. WM Products & Services Priorities
Online
Partner
Cloud
APIs
Young
Affluent
Professional
Online
WM
Requirements
HNWI
WM
Know-‐how
Online
WM
Product
Suite
HNWI
Premium
EdiDon
Online
Partner
Requirements
17. Cloud-based Architecture Model
HNWI
Online
Subscriber Reseller
Online
Partner
Private
Enterprise
Content/
Media
Provider
Regulator
Trading
Exchange
AM
Business
Services
Management
WM
Business
Process
Management
Common
Services
PlaGorm
AM
Business
Process
Management
WM
Business
Services
Management
Self-‐service
Channel
Branch
Office
Channel
Reseller
Channel
Online
Partner
Channel
Call-‐center
Channel
Web
Browser
Client Mobile
App
Client B2B
Web
Services
OperaDonal
Services
Desktops
Big
Data
PlaGorm Financial
Product
PlaGorm
Trading
Compliance
Cash
Mgmt
Billing
Client
DB
CRM
SFA
Research
Content
Mgmt
MoneDzing
PorGolio
Mgmt
Risk
Analysis
DistribuDon
Investment
Channels
Compliance
ReporDng
Wealth Advisor
Researcher
CSR
Partner Manager
Backend
Enterprise
Applications
Sales Manager
Executive
IntegraDon
Bus
Investment
Firm
Financial
Service
18. Engineering Organization Alignment
Product
&
OperaDon
Team
OperaDonal
Tools
Team
Client
App
Team
Data
AnalyDcs
Team
Partner
Engineering
Team
Architecture
Governance
Team
PlaLorm
Services
Team
QA
Team
Financial
Servicing/
Modeling
Team
OrganizaDon
Development
Office
19. 5. Implement the Strategy
Business Strategy Implementation Guidelines
§ Executive’s buy-in and strong sponsorship
§ Secure budget commitment
§ Come up with a blueprint to guide through the implementation
§ Strong governance and review constantly on the state of the business
§ Fine-tune the plan when needed
Products & Services Strategy Implementation Guidelines
§ Fast time to market
§ Scalable operation
§ Secure & robust quality of services in the first place
20. Implement the Strategy (Cont.)
Technology Strategy Implementation Guidelines
§ Start from a smaller scope to address immediate business needs
§ Balance among open-source, commercial out of the shelf, and
home-grown technologies
§ With long-term technology blueprint in mind for cost-effectiveness
Organization Strategy Implementation Guidelines
§ Gradually develop and grow the engineering organization with business
justification
§ Address business continuity and succession planning in longer term
§ Maximally leverage and cooperate with other existing organizations
21. Key Success Factors to Track
Online Business KSFs
§ User base growth
§ Daily active users growth
§ User stickiness improvement
§ Market share growth
§ User traffic growth
§ Paying customer base growth
§ User satisfaction level improvement
§ Lower technology TCO
§ ROI
Overall Business KSFs
§ Total portfolio capital growth
§ Lower user acquisition cost
§ Online monetization growth
§ Ease of regional expansion
§ Ease of global expansion
§ Per employee revenue contribution
improvement (business scalability)
2013 private enterprise report:Units: 3.44 millionRegistered capital: 4,214,600,000,000 CNYWhere51830 large size businessentities>10 million;5 million <= 84620 medium size business entities <= 10 million
Google.com.hkBaidu.comTencentAlibaba
Major Chinese internet giants Baidu, Alibaba, Tencent and Jindong Mall launched their financial products this month, hoping to grab as much as of the market share as possible in China's online financial market, reports our Chinese-language sister paper Want Daily. Baidu offered a group-buying financial product called Baifa on Dec. 23, which offers a product guaranteeing a 8% monthly interest rate for deposits, which is higher than the 6.8% to 7.2% market rate. The company, China's largest search engine, will also provide short-term products which have durations of two months, 14 days and seven days. It also plans to launch a product to target currency funds. The company's first financial product, Baidu Wealth Management B, sold more than 10 billion yuan (US$1.6 billion) worth within four hours after it was launched in October. The lucrative business has attracted the attention of fellow internet giants Tencent and Alibaba. Tencent has been testing its financial product, WeChat United Fund, which could be launched soon, insiders said. Its popular messaging service WeChat has worked with four funds, China AMC, E Fund Management, GF Fund Management and China Universal Asset Management in an attempt to launch financial products in the near future. Tencent is also considering offering high interest rates for its online payment service Yuebao. Meanwhile, Alibaba plans to purchase a 51% share in Tianhong Asset Management to increase its stake in the online financial management market. It has also removed the WeChat share button from its online music service Xiami and microblog Sina Weibo>>>>>http://www.jingdaily.com/4-chinese-internet-companies-betting-on-mobile-wealth-management/40955/The number of mobile banking users in China topped 150 million in 2012, with major banks seeing more than 100 percent growth in mobile and online banking users. Chinese regulators are also looking to shake up the country’s slow-moving financial industry by allowing more types of companies to apply for banking licenses, which has Chinese internet companies with massive user bases and deep pockets looking to get into the banking game.With lines starting to blur between banking, internet retailers, and social media, here’s four companies that are betting on banking:1. WeChatWeChat, the mobile chat app that had more than 300 million users within two years of being started, is now working on distributing wealth products via smartphones, and offering payment options for fund managers, according to Chinese media.Launching mid-December, WeChat’s financial product will allow users to store their savings straight from their smartphones via TenPay, Tencent’s very own third-party payment system. Their money will be accessible at any time and there will be no limit to the amount of money they can deposit (unlike Baidu’s product).WeChat will now double as an e-wallet with a major advantage over its competitors—it already has 600 million registered users.2. AlibabaWay back in 2008 Jack Ma, founder and chairman of Alibaba, vowed to change the banking industry. Now the internet retailer is offering micro loans, securities investments, and payment services. They’ve also co-founded a company that sells insurance policies and settles claims online.Alibaba employees believe the old way of banking is already dead. “The model where people must deposit their money with a bank and the bank lends to borrowers is based on a “decadent, waning philosophy of traditional finance that has been left behind by the Internet age,” Jack Ma said. Many analysts currently believe the only thing separating Alibaba from “real” banks is a license.3. PandaiFounded in July of 2012, Pandai is a Chinese “peer-to-peer” lending start-up with a model similar to that of popular P2P site Prosper in the West. Pandai seeks to connect borrowers with lenders through a credit risk management system that claims to better understand different customer demographics within China.Pandai is claiming lenders can earn fixed-income returns as high as 15 percent by investing as little as 100 RMB, while borrowers are offered the ability to build credit with lower priced loans through a convenient online platform.4. Baidu Baidu, China’s leading search engine, raised more then 1 billion yuan of investment for its new online wealth management product “Baifa” after it was made public in October. Baifa was launched in collaboration with Baidu Finance and China Asset Management, and allows users to make investments as little as 1 RMB with annual interest rates of up to 8 percent.Baidu claims that BaiduBaifa will use the power of the internet, big data, and advanced data mining tools to understand the financial preferences of it’s user in order to help them receive the greatest returns on their investments with a minimal amount of time and capital.Many believe that Baidu, much like Alibaba and WeChat, is looking to create a whole suite of online banking and financial service platforms in the future.>>>>>http://www.forbes.com/fdc/welcome_mjx.shtmlInternet Companies Encroach On China's Banking SectorComment Now Follow Comments Jack Ma, Founder of Alibaba Group (Photo credit: Wikipedia)“The whole nation gathers to deposit money, becoming rich and handsome in an instant,” says a message on the webpage of Baidu’s new wealth management product, “Baifa.”Launched today in partnership with a Chinese funds management company, this product is the latest move in the financial services space by a growing number of Chinese internet companies. Earlier this week, Tencent Holdings announced an unknown amount of investment in a wealth management firm Howbuy, while SouFun, operator of a real estate online search portal, rolled out a financial services platform offering easy access to mortgages and loans. Way ahead in the race, China’s e-commerce powerhouse Alibaba Group joined hands with an asset management company in June to launch Yu’ebao, which allows for the investment of the remaining balance on users’ Alipay accounts in a monetary fund.Baidu Set To Expand Its Video Streaming Service Yue Wang Contributor China's Game of Chicken: PBOC and the Banks Oliver Barron Contributor In China, 'Cats And Dogs Are All Opening Banks' Heng Shao Forbes Staff Hershey Hopes $600 Million Candy Purchase Reveals Key To China's Taste Buds Brian Solomon Forbes Staff The relatively high returns on these financial products have attracted herds of consumers and stocks of their savings. As of mid-November, 30 million users has deposited $1.65 billion on their Yu’ebao accounts, which has averaged a yield over ten times traditional banks’ call rate but still allows instant withdrawal. Baidu’sBaifa, locking deposits for a month, advertises for an 8% return, more than three times the three-month deposit rate at Chinese banks. When the same return rate was trumpeted for its first wealth management product in October, Baidu saw an inflow of $165 million in a short four hours.Such enthusiasm has prompted chatter that internet companies are biting into traditional banks’ business and may even kick them aside. Online finance is already on its way to overhaul the operational, profit and service model of commercial banks, and the days that they can simply profit from
Google.com.hkBaidu.comTencentAlibaba
1. Direct sales staff and wealth manager engagement model cannot scale2. Tight labor market for skilled workers3. More diversified portfolio4. IT response time is slower than business needs5. Low maturity in process and procedure integration6. Underutilized big data asset7. Independent third party position
Business transformation rather than a UI makeover
Expand to the broader WM market via online self-service channelsExpand to the broader AM market via online self-service channelsPartnership with Internet/Mobile App companies to treat them as online institutional channelsAgility in rolling out new investment product offeringsFuture online monetization potential
Expand to the broader WM market via online self-service channelsExpand to the broader AM market via online self-service channelsPartnership with Internet/Mobile App companies to treat them as online institutional channelsAgility in rolling out new investment product offeringsFuture online monetization potential
Expand to the broader WM market via online self-service channelsExpand to the broader AM market via online self-service channelsPartnership with Internet/Mobile App companies to treat them as online institutional channelsAgility in rolling out new investment product offeringsFuture online monetization potential
Expand to the broader WM market via online self-service channelsExpand to the broader AM market via online self-service channelsPartnership with Internet/Mobile App companies to treat them as online institutional channelsAgility in rolling out new investment product offeringsFuture online monetization potential