Ant Financial Enters The Rural Market: Low Net Value Users Can Also Support A Market Of Billions

摘要: Except for the Agricultural Bank of China, the other three national banks do not offer agriculture-related services to the clients. That’s where Ant Financial is targeting, a rather blank space. At present, Ant Financial is entering the rural market to amass all those low net value users that traditional financial organizations can’t cover.

(Chinese Version)

Zhao Bo, who’s currently 25 years old, has opened a shop that sells office chairs on Tmall. In 2015, he once participated in the Tmall discount activity and needed a loan of 160 thousand RMB to support his campaign. At that time, he happened to receive an advertisement of loan services from MyBank, a new bank that just came online, from which bank Zhao Bo had been borrowing money (3 million RMB in total) from mid-2015 to March 2016. “I borrowed the money mostly in situations where I just shipped out the merchandise and hadn’t got the money back to supply the stock. Usually it’s a 10-days period,” Zhao Bo said.

Zhao Bo came to Anji county, Zhejiang province, 40 minutes of driving from Hangzhou, with his parents when he was still a child. This particular county is famous for white tea and it’s also named the home of office chairs. To put it in perspective, one out of three office chairs around the world is made in Anji. Even though Anji is only a county, foreign chain brands such as Starbucks have entered this prosperous region. The housing price in the central area of Anji has reached more than 10,000 RMB per square meter. Despite all that, Anji’s economy is still on the average level in the country.

Before Zhao Bo opened the shop online, he had been away from home studying. After graduation he went to another city and found a job. However, after a year of so he eventually decided to come back to Anji and started his own business on Taobao. In 2015, Zhao Bo and his partners opened a shop on Tmall and three months later they achieved a monthly sales volume of 600 thousand RMB. At present, this double-crown shop of his costs more than one thousand RMB everyday for promotion. In Zhao Bo’s opinion, his business is on the right track as they have struck a balance between cost and revenue.

“It only took me less than a day to get the money,” said Zhao Bo, making high remarks on MyBank’s service. In contrast to that, it would take much more time to get services like that from local traditional finance organizations. Online merchants like Zhao Bo are not the target audience of traditional finance organizations. Before MyBank entered the rural market, Zhao Bo usually turned to friends for help. But now, it’s no longer necessary for him to bother his friends.

The potential volume of new markets is immense

“Last year around 3000 business owners on Taobao and Tmall received financial services from MyBank,” MyBank’s vice president Zhao Weixing told TMTpost. “The total credit extension last year hit 1.826 RMB and the total loan lent out was 108 million RMB. The highest loan that a user got last year was 5.1 million.”

Although being an average economy in China, Anji is merely a county with a population of 460 thousand. Small as it is, there are actually 290 thousand active Alipay users in the town, accounting for 60% of the total population, which paved the way for the development of Internet finance. And because of that, Anji became one of the one thousand counties that Ant Financial wants to penetrate in the very beginning.

Alibaba’s One Thousand Counties Trillion RMB project resonates with the One Thousand Counties and Million Villages project

Since 2015, Alibaba’s chairman of the board Jack Ma had mentioned several time the three strategies of Alibaba in the future: the rural area, Aliyun, and cross-border commerce. Among them, the strategy that focuses on the rural area is considered as the channel for Alibaba to penetrate the downstream markets. Through this channel, Alibaba’s financial services, cloud services, data services and logistics services can therefore further penetrate the downstream markets.

“There are over 2000 counties in China. Under the traditional dualistic city-village system, counties serve as the bridge that connects cities and villages. ” Thus, setting up footholds in counties to offer financial services to local users can bring positive influence over the process of reducing poverty and building smart villages, as well as the making of the complete Chinese credit system.”

According to traditional economic indicators, which include the GDP and GDP per capita etc., Anji county is an economy on the average level in China. However, its Internet index has made a top ranking in the country. In contrast to that, the Internet index considers the number of online shops, online shoppers and Alipay users etc. as well as the number of Internet users active in the area. This is a reference quire different from the traditional ones.

In Anji, you can pretty much see new business forms that are based on Internet everywhere.

At the 1958 Repute Street, hundreds of business owners are using Alipay. Chen Haiyun is part of the mainstream. Graduated from university in Japan, Chen came back to Anji and started his own two-storey Japanese restaurant. “30% of my clients found my restaurant on Koubei and came to have a try,” said Chen Haiyun.

Besides local residents, Alipay also helped businesses like Chen Haiyun’s attract tourists. In 2015, the very first kitty theme park in China opened in Anji, attracting tourists from neighboring cities such as Hangzhou, Huzhou and even Shanghai to this small town. It’s reported that over ten thousand tourists came to visit the theme park on the opening day. “We drove to Anji. And we booked the hotel and tickets on the Internet,” Qizi, a journalist from Huzhou Broadcast, said. “We also found the restaurants on the Internet.”

The director of Ant Financial’s public service department Lin Guangyu revealed to TMTpost that such cases also took place in other regions. In 2015, without any promotion campaigns, the 17 agricolas in Jiande Zhejiang province brought 75% of the tourists to the region during the National Holiday. As independent travel and day trip continue to gain popularity, tourists also grow reliant on O2O apps such Meituan, Dianping, and Koubei etc. to find local entertainment and food after they have booked the transportation and hotel.

Users that are neglected by traditional finance organizations

According to a report from CITI Bank, Chinese third-party payment platforms now serve just like another bank system. Different from traditional banks, the representative figure of the FinTech in China, Alipay, mainly targets ordinary users, small businesses, rural areas, and provides inclusive finance products, covering the sectors that traditional powers neglect.

The service window of traditional banks is the counter while the service window of Alipay is the app. In the past, traditional helped the local administration of power supply, water supply companies, cable networks, and telecom department charge residents the utility fees. At present, all these things can be done on Alipay. Ant Financial calls it Utility services. Lin Guangyu, director of this sector, stated that this function focused on cities in 2015 and would tend to focus on counties and villages in 2016.

In contrast to cities, villages and towns might actually be in need of such service windows more. On one occasion, Lin Guangyu went to Guizhou to conduct a field study, and he happened to see local farmers trying to get their social security card from the Agricultural Bank of China. At the counters there were piles of bankbooks and the queue was very long with farmers waiting. At that time, it occurred to him that the utility services in rural areas have great potential for further improvement. From Alipay’s perspective, the platform only needed to provide such services on the platform then it would make the residents’ life easier in that sense. Services that traditional banks provide Alipay can also make them happen.

To provide utility services, Ant Financial would need to negotiate with local governments and public institutions to have their support. Luckily, Anji county’s Committee of Economy and Information favored their proposition. “We work with Ant Financial to make Internet channels more accessible to local residents,” a staff said. “We don’t force other departments to cooperate with us.”

Anji county decided to team up with Ant Financial in the hopes of improving the public services. After all, on one hand, if each government department develops their own app to reach the residents, it would be a chaos. On the other hand, such actions would make government departments isolated from each other, which would bring great difficulties to service integration in the future.

The sharing of data proves to be essential in this information era. The three first-tier cities in China, Beijing, Shanghai, and Guangzhou, have made initiatives to utilize these data to build smart cities so as to improve their administration efficiency.

Today, Ant Financial is making efforts to bring its services to rural areas. Severable terms’ data shows possibilities of cooperation. Aliyun once made a product for utility services: A map of counties. Aliyun collected data sources online and built a data model. Aliyun then applied around 20 economic indicators to the model and develop a real-time visual online chart that can show statistics in the forms of histogram, pie chart, or table etc.

Individually speaking, every offline utility payment is like a point up in credit. Now online payment also contributes to the accumulation of credit. Young people like Zhao Bo can borrow money from MyBank in accordance with their credit accumulated through their shops on Taobao. The first borrow (without pledge) can be up to 160,000 RMB. For brick-and-motor business owners like Chen Haijun, he accumulates credits through Alipay and koubei. Besides that, credit assessment can also be done from other perspectives: for example, whether he has paid the utility fees on time, whether he goes to the hospital very often, and whether he has traffic violation records etc.

At present, the credit systems in China mainly focus on people living in cities, with 80% of the population, mostly living in rural areas, being neglected. In cities, people tend to apply for credit cards at banks, which won’t work in rural areas since there aren’t enough traditional finance organizations there. According to statistics, the number of such organizations in rural areas has dropped from 60,000 to 20,000 in the past two years. Except for the Agricultural Bank of China, the other three national banks do not offer agriculture-related services to the clients.

This is Ant Financial’s opportunity to enter the rural market to amass all those low net value users that traditional financial organizations can’t cover. It might provide services such as small-amount loan, transaction, utilities, and credit system in rural areas in the future, which is the ultimate goal of Internet finance.

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[The article is published and edited with authorization from the author @Guo Juan, please note source and hyperlink when reproduce.]

Translated by Garrett Lee (Senior Translator at PAGE TO PAGE), working for TMTpost.

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