While it only has a twenty-year history, China's financial asset management sector has readily implemented the recent advances in digital technologies such as big data analytics and machine learning.
All types of newly emerged tech-driven investment products and services, including automated advisory services, AI-assisted quant funds, peer-to-peer and blockchain-based asset management, and monitoring and data analytics services, have gained considerable popularity in China. Business-facing offerings aiming to improve operational efficiency or lead generation such as intelligent conversational bots and customer profiling tools have been widely developed.
“The total individual investors of internet-based asset management platforms and services more than doubled in the last four years, reaching 169 million as of June 2018, or 21% of the total internet users in China.”
With the increasing reliance on digital data, tech-driven products and services are actively utilizing data generated across the Chinese web, which is dominated by local internet companies rather than major international internet services. Such data sources such as local search engines, financial news outlets, and social media are used for data-driven offerings ranging from quant funds to market monitoring services.
Profound changes have been brought to the retail market where a) access to traditional retail investment products and services have been democratized, b) online channels and tech-driven tools are replacing the brick-and-mortar incumbents to become the major interfaces between individual investors and financial products providers, and c) tech companies have become the standard industry benchmarks in the delivery of customer experience and technology.
The total individual investors of internet-based asset management platforms and services more than doubled in the last four years, reaching 169 million as of June 2018, or 21% of the total internet users in China, according to China Internet Network Information Center.
Some local fintech companies have evolved from retail products providers to tech solution suppliers that enable traditional financial institutions to sell and market products online.
9F Group, a fintech developer founded in 2006, launched a whole set of online financial offerings for the retail finance market and more recently is starting to provide fintech solutions to third parties.
9F Fintech Holdings Group is a fintech company based in Beijing, China.
Through different mobile apps, 9F Group allows users, mostly individual investors, to invest in peer-to-peer loans, mutual funds and shares traded on the stock exchanges in the U.S. and Hong Kong, etc.
To assess and manage credit risk in peer-to-peer lending, the company developed big data-based personal credit risk rating and fraud detection systems. The time needed for credit decisioning has been reduced to several seconds, according to the company. Their data sources include telecom operators, online banking and payment services, and public sector information like social security records. To acquire more data, the company also works with other major personal credit scoring services such as Zhima Credit of Alibaba's finance arm and Qianhai Zhengxin of insurer Ping An.
A video authentication system, with AI capabilities such as the recognition of faces, voice and other biometrics, has been developed for identity verification. Machine learning is applied in fraud protection.
“9F is now providing easy-to-launch, end-to-end tech solutions to financial institutions, banks, brokers, etc. It gives third parties access to the company's data warehouses, user bases, and AI capabilities and other tools.”
Voice-based AI bots are introduced for debt collection. A phone-calling bot is able to handle five times the daily workload than that of a customer services representative. It can save 60% in human resource, the company claims.
For its stock trading app, the company has developed a robo-advisory service.
Armed with all the technological tools and platforms developed for consumers, 9F is now providing easy-to-launch, end-to-end tech solutions to financial institutions, banks, brokers, etc. It gives third parties access to the company's data warehouses, user bases, and AI capabilities and other tools.
The company has also built an affiliate network for third parties to acquire customers or generate leads online. A suite of automated tools is available for customers to improve the performance of ads and other campaigns and track data.
For wealth management products providers, the solutions help them reach users on 9F's platforms and market products and services on the affiliate network.
Other AI-assisted tools 9F offers to financial institutions include risk management systems, voice bot, voice message analysis, and a few other tools for customer services. It also offers cloud services to institutions.
The marketplace lending platforms of 9F, launched in 2014, had attracted 2.9 million cumulative investors, with more than 50% being aged 18-35, and 9.8 million cumulative borrowers as of the end of 2018, according to the company. (link in Chinese) Total registered users on all 9F platforms have reached 73 million.
Starting as a peer-to-peer lending platform, Lufax, the online asset management service operated by insurer Ping An, now offers a range of public and private investment products targeting high-net-wealth individuals.
A sign of wealth management platform Lufax is seen during an expo in Beijing, China December 11, 2015 Source: Reuters
The Know Your Customer (KYC) system Lufax has developed provides personalized offerings to investors, aside from risk assessment and management features and customized educational materials. The system uses customer profile and behavioral data and machine learning to understand and match investors' needs.
Lufax had obtained more than 40 million users as of June 2018. The managed assets was over 362 billion RMB as of September 2018.
One of Lufax's data sources is its parent company. As one of the largest insurers in China and more recently a major finance technology developer, Ping An offers various tech solutions to investment services providers, ranging from online sales platform to robo-advisory.
In the first three quarters of 2018, 81% of the public mutual fund sales in China were facilitated by online channels, according to the latest report on China’s internet-based asset management market published by Chinese internet market research firm Analysys.
Yu'e Bao, a signature innovation in the public fund sales area, reached 600 million cumulative investors as of the end of 2018, the company announced at a recent conference. The total assets under management was 1.1 trillion RMB (168 billion USD) at the end of 2018.
Launched in 2013 on Alipay, China’s leading online payment and financial services platform affiliated with e-commerce giant Alibaba, Yu’e Bao enables the users of Alipay to invest in or redeem money market funds with ease. Riding the momentum of the wave of Yu’e Bao popularity, Alipay’s parent company rolled out in 2015 Ant Fortune, a separate mobile fund sales platform where fund management firms can set up shop to sell and market investment products directly to app users. In mid-2018, Ant Fortune announced to open the AI capabilities developed in-house, including the customer service chatbot, to fund management companies on Ant Fortune. More recently, the company said they’d soon open the blockchain and risk management capabilities to third parties.
Following Yu’e Bao, a wide range of established consumer-facing internet platforms, including dominant messaging apps, search engines, and most recently ride-hailing apps, have introduced retail fund products with the same level of ease of use to their existing users.
"It is estimated that China’s investment fund industry will be fully digitalized by 2025."
Not only have these online and mobile platforms successfully gained large numbers of investors, but they have also become increasingly important marketing channels for fund management companies and other financial services providers.
It is expected that big tech companies and independent tech solution providers will be the major empowering force in the digitalization and intelligent-ization of these areas in China, especially in data-driven solutions and customer experience improvement. While the incumbents are also developing tech-driven products and systems, increasingly more are adopting business-facing automated advisory services, intelligent asset allocators and other solutions from independent solution developers or big tech companies.
It is estimated that China’s investment fund industry will be fully digitalized by 2025, according to the aforementioned Analysys report. By then China is projected to become the world’s second-largest asset management market.