Can the rural aged ever expect to enjoy the same quality financial services as the president of a national bank and to access them just as easily?
According to Eric Jing, chief executive of Ant Financial, the private company behind China's largest digital payment service provider Alipay, the answer is a resounding 'yes'.
"It is expensive to be poor," Jing said this week at the 2017 Global Netrepreneur Conference, a Alibaba-led event held at Hangzhou. "But at Ant Financial, we believe the power of technology could create a new finance ecosystem and bring the world equal opportunities."
Jing's big idea is to build an open platform that allows every party – from individuals and small businesses to large companies – equal access to a full universe of financial services. This financial promised land, centred as it is on the world's most populous nation, has investors understandably excited ahead of a tipped listing next year. The IPO has the potential to be the largest fundraising ever by a fintech innovator.
Ant Financial is already estimated to be worth more than $75 billion, according to equity analysts.
Financial inclusion could help narrow the gaping wealth divide between China’s richest people, mostly living in urban areas, and its rural poor. Social stability is becoming an increasing challenge for the Beijing government as economic growth slows to a forecast 6.5% this year, one of the lowest rates in 25 years. In industrial areas, workers have rioted to protest steel mill and pit closures.
Financial inclusion was also a theme in the IPO of the $7.4 billion Postal Savings Bank of China (PSBC) in Hong Kong last year. Ant Financial was a pre-IPO investor in the bank.
Jing's quest for a relatively more socialist banking model comes at a time when financial institutions are inclined to better serve the rich and powerful, be they wealthy individuals or big companies, and when the cost of accessing financial services varies greatly across the world.
"Traditional finance serves a small group of customers and is categorised by a number of 'highs', including a high difficulty of obtaining new clients, high cost of operation and high credit assessment risks," Jing said. "But the new finance system should be inclusive and supports the needs of most customers in a safe and convenient way."
That dovetails also with the aims of the Chinese state after President Xi Jinping, in his July 7 speech to the last gathering of leaders from the G20 major economies, expressly called for greater financial inclusion to help drive economic development.
Rural access
Ant Financial's vision of developing an inclusive financial service platform is supported by technological innovations in mobile internet, big data, cloud computing, blockchain, as well as biological recognition and artificial intelligence.
Mobile internet is the backbone of the new finance ecosystem, according to Jing. With the power of the internet, people in remote areas will be able to purchase goods online, receive cash remittances, and conduct banking activities without getting to a bank branch, which may take hours at times.
In particular, the rise of mobile internet and big data technology allows people in rural areas to develop a credit profile in order to get loans more easily.
The rural populace has historically been less able to borrow because many of them have no bank statements, asset certificates, and credit records. In many places, lending is purely based on reputation – meaning that non-frequent borrowers are less likely to get a loan.
Eric Jing, Ant Financial CEO
"Without a credit profile, good credit is not an asset," Jing said. "But in fact good credit should be a form of capital, like a physical asset, that enhances trading and supports economic development."
Ant Financial operates Zhima Credit, a third-party credit-scoring platform that shows the creditworthiness of individuals and small businesses with the support of cloud computing and machine learning.
Since its establishment two years ago, Zhima Credit has provided credit assessments over 500 million times and offered Rmb100 billion ($14.7 billion) of credit extensions. The system enhances lending by helping lenders to assess credit risks more effectively.
At the same time, Ant Financial provides lending services through its micro-loan service platforms Ant Credit Pay and Ant Cash Now, as well as wealth management services through its online money fund Yuebao.
"Finance should be developed to narrow, instead of enlarge, the gap between the rich and the poor", Jing said.
Cashless society
Ant Financial's big vision also includes the development of mobile payments to make China a cashless society within the next five years.
Cashless payments are already proving popular in many Chinese cities. In Ant Financial's hometown of Hangzhou, cash is no longer needed as Alipay supports payment for literally everything from transport and shopping to paying bills. Some of the city's new shops and restaurants even refuse to accept anything other than Alipay as a form of payment, which eliminates the costs associated with storing cash and makes revenues more secure.
First developed as an online payment system for Alibaba's online marketplace, Alipay has expanded into the physical world, enabling users to make payments instantly by scanning the QR codes in their smart phone.
For Jing, the development of mobile payment technology is more than just a matter of making things more convenient for shoppers and traders. For him, it is also about making society more efficient, improving security, and about reducing the impact of human beings on the environment.
For instance, non-emergency patients can now register and pay through their mobile platforms, which means they no longer need to wait in the long queues typically seen at Chinese hospitals. Thanks to mobile payment, treatment times have come down by 60% to an average of 52 minutes, Ant Financial said.
Similarly, daily household payment can be made through online channels, thereby saving time and resources for alternative use.
All these payment records, in turn, become part of Ant Financial's credit scoring system, creating a large pool of information that allows lenders to conduct credit assessments effectively. And because Ant Financial's lending platform is transparent about the details of both borrower and lender, it helps to prevent fraud, especially in less developed areas, according to Jing.
Green lifestyle
Jing's big vision has a green tinge too. In September last year, Ant Financial launched Ant Forest, an online application that promotes living a low carbon lifestyle by measuring the carbon emissions of individuals' daily activities.
Any actions taken to reduce carbon footprints – walking, riding a bike, purchasing movie tickets online – will earn the user energy points, which can be spent to grow a virtual tree in Ant Forest.
Ant forest app
Ant Financial, together with its public welfare partner See Foundation, will plant a real tree in the desert area of Inner Mongolia when any user plants a specific number of virtual trees and collect a specific number of green energies.
As of the end of April, Ant Forest had contributed to the reduction of 5,000 tons of carbon emissions per day and planted a total of 8.4 million tress on behalf of its users.
Chen Long, chief strategy officer at Ant Financial, said Ant Forest is Ant Financial's latest effort to connect the virtual world with the real world and contribute to environmental sustainability.
"It is a new form of green finance that we are promoting as part of the new ecosystem," Chen said. "If our users care [about reducing carbon emissions], the merchants will care. If the merchants care, the manufacturers will care. This creates a good cycle."
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