Proper financial inclusion is directly linked to social responsibility – we can’t aim for financial inclusion without the intention to make the world a better place. Bearing this in mind, we’ve reviewed the global case for financial inclusion from the Chinese group Ant Financial.
By Kate Shcheglova (Goldfinch), Science editor at The Fintech Times
Ant Financial, along with its associated holding company the Alibaba Group, has an unusually high (for Chinese companies) level of social responsibility. All of its activities are aimed at making the world a better place. It’s an approach that has enabled the company to become China’s leading payments provider.
The core mission of Ant Financial is using technology to improve society: “As a tech company, what we want to do and are currently doing is to use technology to bring society back to the origin of human beings: simple, equal and free.” Their business model is based on three basic principles: an equal society, an inclusive economy and a green environment. Ant Financial’s case promotes an interesting idea for solving issues of solvency and prosperity as the basis for achieving financial inclusion. The criteria should be achievable. For example, instead of making someone’s credit history the criterion for rating their solvency (perhaps they’d never had the chance to obtain credit?), basing it on their social reliability (stable behaviour, paying their bills on time, etc). This would give a solvency rating that wasn’t based on credit history, but on the applicant’s personal trustworthiness.
This approach could provide affordable financial services to individuals who haven’t previously had access to them (the unbanked population). This way of operation is a perfect illustration for Ant Financial’s case – a company which has set up Zhima Credit, a creditworthiness assessment program. It’s a way of enabling mass-market access to financial services and various payment services using a simplified approach. Whether the application is for renting a house or ordering landscaping works, trustworthy members of the system will get access to better deals – without putting up collateral, at lower rates, without prepayment, etc.
That’s real financial inclusivity in action. This is the opposite of officials in various emerging markets (with big percentages of unbanked and financially excluded populations) attempting to bring poor people into the financial system or force them to spend more, which could become a serious financial burden on their future lives. This isn’t the honest way for the inclusivity.
It’s much better to transform the world from a mutual beneficial, collaborative point of view – to set up a clear system for people marginalised by banking services, low credit scoring or inadequate savings, which rates their reliability according to their social behaviour and status. What’s needed is easy to understand financial services, with access to financial resources to get people’s lives and businesses going.
5 key facts about Ant Financial (based on Digital human by Chris Skinner):
1. Ant Financial, the Alibaba affiliate that looks after the firm’s hugely popular Alipay service, is now worth $155 bln.
2. Credit card-based payment systems have proven ineffective in China. Even more important than credit card penetration rates, is the issue of trust between buyers and sellers in a business environment. Alipay was designed to overcome these hurdles with a model specific to China’s needs. Now it’s a dominant payments system with 520m users, giving it a 70 percent share of mobile payments in China.
3. Alipay’s processing beats all records. On China’s Singles’ Day in November 2016, Alipay processed an average 120,000 transactions per second (tps) for a total billing of $17.7 billion in the 24-hour period. At some points, it was processing 175,000 tps (Visa averages 1,750 tps and scales to 24,000 tps). In 2017, Chinese consumers spent a total of $25 billion across Alibaba’s e-commerce platforms, of which $8.6 billion of orders were processed in the first hour alone, with the company’s processors handling over 250,000 tps.
4. Ant Financial is the first company to build a global vision of financial inclusivity through technology. Alibaba’s original idea was not to create a massive payments service, but to overcome a key challenge of e-commerce in China: trust. No one trusted buying online. To insure Alipay is China’s safest way to trade online, Alibaba. com has launched its escrow system to reimburse any buyer or seller using the system who is found to have been a victim of fraud.
Eric Jing, CEO at Ant Financial: “We have an ambition to be a global company. My vision (is) that we want to serve two billion people in the next ten years by using technology, by working together with partners … to serve those underserved. How will the company do this? By leveraging all of the key technologies of today: cloud, data analytics and distributed ledgers. All these technologies will be used … to bring more, a high level of security…”
Davos, January 2017