JD Finance: To be FinTech or TechFin?

On July 2018, JD Finance was closing it Series B financing round to raise RMB13 billion ($1.96 billion) with a fresh valuation at over $1.98 billion (RMB133 billion) of investment from several Chinese financial services giants. Just like JD.com versus Alibaba, JD Finance is competing with Ant Financial, who raised $14 billion in the world’s largest-ever single fundraising by a private company and valued at $150 billion on June 2018. Does JD Finance really worth this high value? Interestingly, JD Finance defines itself as “Fintech”, while Ant Financial calls itself “TechFin”. Should we classify JD Finance as FinTech or Techfin?

E-Commerce Giant’s Gene

JD Finance used to be the finance unit of JD.com, one of the largest e-commerce companies in China. Started from October 2013, JD Finance began operating as an independent company, focusing on being a partner to financial institutions through its technology solutions. It takes full advantage of technology integration and cross-company synergy, allowing the company to offer corporate, retail, and rural customers safe and customized financial services.

To Customers (To C), JD Finance provide series retail products and services to over 400 million individuals, majorly consumer finance, payment and wealth management products. To Business (To B), they provide technology solution/service to over 700 financial institutions.    

Based on its parent company, JD Finance’s core advantages lies in massive, multi-dimensional and dynamic big data coupled with the cutting-edge technology. Over the past five years, JD Finance continued to input more in data of Chinese market, and take a leading position in data quantity, data source and data processing capacity. At present, the data quantity of 200TB is increased every day.

Restructure and Transformation

On May 26^th, JD Finance announced restructuring plan and split business lines into two working groups: Personal Services and Enterprise Services. These two groups encompass JD Finance’s ten business arms: supply chain finance, consumer finance, wealth management, payment, crowdfunding, insurance, securities, rural finance, financial technology, and international business.

This restructure reveals JD Finance’s transformation plan and vison. The company is switching business model from B2C model to B2B2C model. Previously, the company served customers directly by providing financial products and services; now they more focus on serving financial institutions directly by leveraging previous accumulated experience and data. Chen Shengqiang, chief executive office of JD Finance said, “JD Finance’s revenue will come from serving financial institution instead of holding financial assets in the future”.

In the following, JD Finance will implement their decapitalization strategy: transforming their financial assets to financial institutions. We can take Baitiao, consumer financing product, as an example: JD Finance will move the asset to banks and provide services such as risk management or marketing campaign. Similarly, Ant Financial is taking the same action.

Massive Coopearation Model

To date, JD Finance has cooperated with over 400 banks, over 120 insurance companies and over 110 fund companies. JD Finance entered a partnership with China UnionPay to bring JD QuickPass to more than 19 million POS terminals and over 8 million merchants. JD Finance is the first non-financial institution to have access to UnionPay QR codes. In recent years, JD Finance has successively launched 25 co-branded credit cards in cooperation with 11 banks, including the major banks such as ICBC, China Merchants Bank and China CITIC Bank.  

Compared with traditional IT Vendors, who usually help financial institutions build IT systems, JD Finance is more advantaged on its affluent data and scenarios. By depending on its e-commerce data, financial data and various third party data accumulated from its users and partners, JD Finance has developed a number of cutting-edge application model systems, namely, risk quantification model system and precise marketing model system, through emerging technology such as AI, biological identification, cloud computing, blockchain. These systems have been applied in finance scenarios.

Specifically, JD Finance has realized credit extension and loan disbursement free of manual review through AI technology, such as deep learning, graphic computation, bioprobes, with its overdue rate and rate of capital loss being over 50% less than average level of the industry. Besides, JD Finance also delivers its smart risk control ability, and helps banks enhance their credit review efficiency by more than 10 times. Over 70% of costs per customer have been saved.

From Stage 1.0 to Stage 2.0

JD Finance is positioned to be a technology company which serves financial institutions. JD Finance develops from stage 1.0 in which it does financial business independently to stage 2.0 in which it serves financial institutions. At the stage 2.0, finance and technology respectively return to their origin. Technology companies and financial institutions have their own advantages and complement each other's advantages. Pertaining to enterprise services, the business model of JD Finance targets at a kind of services which can bring new value to financial institutions.

Seen from the origin of value creation, the enterprise services rendered by JD Finance is aming to help financial institutions achieve transformation from two aspects: digitalization and full-scenario.

To be a FinTech or TechFin? Actually, those two words are just not much different. At the Boao Forum for Asia 2017, Chen said, “Be it FinTech or TechFin, both should obey the nature of finance”.