March 14, 2018
Jack Ma said back in 2013, There are two big opportunities in the future financial industry. One is online banking, all the financial institutions go online; the other one is internet finance, which is purely led by outsiders. The financial industry needs spoilers to make a revolution. Ma added, Sometimes we think, ‘I can do better.’
Alibaba did follow the course of Ma’s expectations, and today, the group has strong lines of non-core business, rivaling banks and other tech giants.
Ant Financial’s consumer lending has reached at least 600 billion yuan ($95 billion) despite the affiliate of Alibaba Group Holding Ltd. facing a tougher environment for securitizing its loans.
Ant has become a financial giant that was said to be valued at $60 billion and currently has more outstanding consumer loans than China’s second-biggest bank. Ant Financial’s outstanding consumer loans are almost 3.7 times the size of China Construction Bank Corp.’s.
Last month, Alibaba announced it would buy 33% of Ant Financial in a move seen as clearing the way for an IPO. Alibaba hasn’t held a stake in its finance affiliate since Ma spun out the business in 2011.
As it has been the case throughout 2017 and the early part of 2018, small-business loan approval rates for big banks hit another new high last month. Big banks are granting more than one-quarter of the small business loan applications they receive. The 25.4% approval percentage, up one-tenth of a percent from January 2018, represents another new post-recession benchmark for big banks.
One of the reasons lending figures have climbed is the revolution of online retail led by Amazon. There is a lot of demand to fund commercial real estate. While mall construction has essentially halted, e-commerce has caused a boom in the construction of warehouses and other industrial buildings. Additionally, companies involved in transportation and logistics are servicing Amazon and other online retailers.
Overall, Amazon Lending has made more than $3 billion in business loans ranging from $1,000 to $750,000 since 2011 to help small and medium businesses selling on Amazon grow their enterprises. In February, CNBC and others reported that Amazon has partnered with Bank of America Merrill Lynch to expand its small business lending efforts. In doing so, the company reportedly seeks to reduce lending risk while still being able to provide credit to its merchants.
Tandem, the UK challenger bank continues to be on a shopping spree. Following the purchase of Harrods Bank, the banking arm of the luxury British department store, the company is acquiring Pariti, a money management app that has garnered 95,000 users.
Pariti CEO Matthew Ford explained that Pariti had always intended on developing additional smart financial products of its own, not simply partnering with third-party providers, in order to help consumers save and avoid paying too much for their debt.
The thinking goes that a financial control center powered by account aggregation provides access to a lot of valuable data and that some of that value can be captured and returned to customers in the form of more bespoke and innovative products that better match their lifestyle, spending habits and credit profile. But to do this is in the most meaningful and ambitious way, you need to have greater control over the design and delivery of those products.
In other words, depending on product category, third-party integration can only get you so far. And that’s where Tandem’s acquisition of Pariti comes into focus.