Ant Financial’s “TechFin” vs JD Finance’s “FinTech”

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Ant Financial recently coined the term “TechFin” as an outright challenge to JD Finance’s “FinTech”. Who will eventually win the intellectual debate?

Editorial

Alibaba’s Ant Financial Services Group and JD Finance are at loggerheads in the Chinese, and increasingly, global e-commerce scene. In 2015, JD Finance recommended the use of “FinTech.” In December 2016, Ma Yun coined the ”TechFin” as a rebuttal, and as a show of thought leadership.

Ant Financial’s unveiling of “TechFin” shows the firm’s focus on building technology rather than financial products. Yu’e Bao founder Zu Guoming emphasised that Ant Financial competes with its massive user base and its superior technical capabilities, not in creating financial products.

Zu added, “Financial products are made by financial institutions. Our job is to allow these financial institutions to tap on our ready-made technology, and that includes acquiring the upgrading technology (such as Finance Cloud and payment processing ability) and user capacity through leveraging on big data.”

As concepts, TechFin and FinTech are more synonymous than they appear to be

Technological reform of the finance industry is deepening.

The development of network communications technology is leading to a decline in cash transactions in the country. Chairman of the Internet Finance Association of China Li Dongrong concluded the driver of technology to finance started from financial computerisation to financial informationalisation and finally, financial digitisation.

But “TechFin” and “FinTech” are still elusive terms. People wonder if these two concepts are fundamentally different, or if Ant Financial was simply trying to be different with its “TechFin” concept.

At the Boao Forum for Asia 2017, JD finance chief executive Chen Shengqiang said, “Be it FinTech or TechFin, both should obey the nature of finance”.

Critics believe there is not much difference between TechFin and FinTech. Critics believe Ant Financial coined TechFin to gain a foothold from the conceptual standpoint; a counteroffensive to JD Finance’s aggressive marketing of FinTech. This is inevitable considering “FinTech” as a term already achieved credibility within the finance and other related industries.

Internet finance companies in China are quick in assessing an upcoming battle between China’s two Internet finance giants. Many are adapting themselves through concept switching; they are returning to the concept of financial technology.

Wikipedia defines FinTech as a way to make financial services more efficient through technology. Cutting-edge technologies such as artificial intelligence, credit collection, blockchain, cloud computing, big data, and mobile interconnection, are used to boost efficiency in the finance industry.

Ant Financial chief executive Eric Jing said that finance is the core of risk management. TechFin relies on technology and data capacity to promote financial innovation, serve consumers and merchants, and enhance the risk management ability of financial institutions. It helps financial institutions upgrade comprehensively.

Ultimately, FinTech and TechFin are almost synonymous. Both aim to use data and technology to improve the financial industry’s efficiency and cost-effectiveness.

Ant Financial and JD Finance are more complementary than competitive

Onlookers see Ant Financial and JD Finance as longstanding rivals. JD.com’s recent sale of JD Finance for US$2.1 billion in cash was seen part of a deal to spin off its burgeoning finance arm and raise its game against Ant Financial.

But China’s two technology giants are more complementary in the financial scene than meets the eye.

Ant Financial focuses on the traditional model of the Internet while JD Finance focuses on product innovation, for a start. Each business model has its advantages. Ant Financial and JD Finance are taking paths that diverge more than converge. Both companies are more likely to play different roles in the financial scene as they continue to grow.

Ant Financial also seeks to leverage on Ant Check Later (花呗), a virtual credit card, to open up a whole new road map for credit distribution in Internet finance. In contrast, JD Finance aims to boost user’s consumption through its products. Its Jingxiaodai (京小贷) appeals to merchants who need fuss-free and almost instant access to credit.

Even then, Ant Financial and JD Finance are unlikely to become goodwilled partners. As they grow in the payments area, they are likelier to clash and compete. Alipay already takes up more than half of China’s mobile payment market. JD Finance showed its intention to catch up with Ant Financial. The former consumer finance chief at JD Finance, Xu Ling, took over Jingdongbaitiao. Her entrance indicates JD Finance is paying more attention to their payment business.

These divergences and convergences in business paths suggest a dynamic rivalry between Ant Financial and JD Finance. Competition between them is less all-out then it appears to be. But their relationship is not always cordial too.

Big data is king

Companies can easily obtain big data thanks to today’s era of Internet and finance. But whoever gets monopolistic hold of big data will lead the race. This is because big data generate consumption profiles of consumers. With the personalised nature of big data, companies can then develop scenario-based financial services.

Scenario-based financial products are more appealing to consumers because they are rooted in concrete daily life scenarios. Consumers are more likely to use scenario-based financial products as a way of convenience. Both technology giants must work on creating more financial products that cater to Chinese consumers’ daily life.

The concept war between TechFin and FinTech may not be such a big deal after all. Concepts do not matter if consumers are not reaping any benefits. But if anything, only time will tell the effectiveness of Ma Yun’s “TechFin” rebuttal.