Ant Financial shifts focus towards tech solutions

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Faced with strengthening regulations on consumer finance and a growing need for online financial services, Chinese fintech unicorn Ant Financial Services Group has announced a shift in focus towards offering tech solutions to traditional financial institutions.

During the 2018 Ant Technology Exploration Conference (ATEC), held from September 20 to 24, the company launched Ant Financial Technology, a new brand covering a suite of technology products and services, to support the digitalization process of financial institutions.

The company's fintech solutions consist of five product portfolios, namely large-scale financial transaction technology, financial security technology, financial intelligence technology, interactive technology and blockchain applications.

ATEC in Hangzhou, east China's Zhejiang Province on September 22, 2018 /Photo from Ant Financial

A shift towards tech services

With its hugely popular mobile payment application Alipay and online monetary fund product Yu'ebao, Ant Financial has been regarded as a disruptive force in the traditional financial sector, particularly in banking.

But now the company is looking to define itself not as a rival but as a partner to traditional banks and financial institutions, by offering fintech solutions.

Although its technology solutions are not primarily looking to generate a new source of income, "the revenue will not be low" if the company can serve hundreds of banks in China, Liu Weiguang, chief technology officer of Ant Financial said during the ATEC.

The income generated by tech services will account for 65 percent of Ant Financial's total revenue in five years, doubling the 34 percent recorded last year, Reuters reported in June.

Ant Financial's shift in focus was first revealed last March, when the company said it "will focus on technology and support financial institutions."

Ant Financial is not the only fintech player shifting its focus towards supplying technology services and solutions.

JD.com affiliate JD Finance is in the process of changing the company's name to JD Digital Tech, to better highlight its shift to providing data and cloud services.

Chen Qiangsheng, the CEO of JD Finance, said in February that the company's future revenue will come from selling services to financial institutions instead of capital-generated income.

China started implementing stricter regulations on the online finance sector last year.

For example, many major Internet companies had issued securities backed by micro-loans, causing concern among regulators because of the lenders' high debt levels and limited asset disclosure. This was followed by limits on lending backed by securities products announced last December.

Meeting banks' needs

The growing need to adopt digitalization and advanced technology has ensured risk-averse banks will accept Ant's financial grade distributed framework, said Liu.

CFPA Microfinance, a small loan lender backed by Ant Financial, reduced its loan approval process from two or more days to less than 10 seconds after adopting Ant's technology, its president Liu Dongwen told CGTN during the ATEC.

Bank of Nanjing, the first major bank to leverage Ant Financial's SOFAStack (Scalable Open Financial Architecture) and OceanBase database, has expanded its loan underwriting capacity, enabling it to comfortably process one million loans per day with an average processing speed of less than one second.

Ant Financial is also establishing its own open source machine-learning framework for financial institutions, to combat data isolation and create more value, Alan Qi, the company's vice president and chief data scientist, told CGTN during the ATEC.