Retail banks are quaking at the arrival of mobile upstarts. They will need to reinvent themselves to survive
business because I love milk tea myself,” says Peng Yuxia. Meet the Cow, her shop in Hangzhou, 200km south-west of Shanghai, sells the cassava-based hot drink, also known as bubble tea, to passers-by—and, increasingly, to customers who pre-order on their phones. Recently she signed up to a small-business programme run by Ant Financial, China’s biggest fintech firm, which has its headquarters nearby.
In the past five years Ant has expanded beyond payments and into other financial services. In 2013 it set up Yu’e Bao , a single-click, instant-access way to earn interest on excess Alipay balances by parking them in a money-market fund. By March 2018 the fund had 1.7trn yuan in assets, making it the world’s biggest money-market offering by a wide margin.bank, using Alipay data to set interest rates and credit limits for small-business loans.
Start with the threat from Ant itself. Many bankers in developed countries fear that its plans for aggressive expansion beyond China have merely been postponed. That worries rich-world incumbents, since a hungry new arrival would mean slimmer pickings for those already at the table.
The mobile phone allows financial products to be linked with other services in novel ways. Take Ant Financial’s main rival, Tencent, the social-media and gaming giant that owns WeChat. It moved into payments in 2013. Uptake was slow until the company spied an opportunity in the tradition of giving cash gifts in red envelopes to friends and relatives during Chinese new year. In 2014 it added a digital “red envelope” feature to WeChat; 40m were sent over the holiday period.
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