Du Xiaoman, as the top 4 of 'Fintech100' presented by KPMG, still has a huge gap with Ant Financial, Tencent Financial and JD Financial (JDD for now) for the lack of strong user account system and capital flow. But the company still has great potential for the accumulation of data and algorithms, as well as the insights of consumer needs from the search service of Baidu.com.
According to the fifth annual ‘Fintech100’ report presented by H2 Ventures and KPMG on October 23, 2018, which compiles a list of the year’s best fintech innovators from around the world, Chinese fintechs continue to dominate the top of the list, accounting for three of the top five places on the Leading 50 list with Ant Financial in first, JD Finance second and Baidu fourth.
Similar to the relationship between Alibaba and Ant Financial, JD.com and JD Finance (officially renamed JD Digital), Baidu also spun off its Financial Services Group (FSG) in April 2018 and launched the whole new brand “Du Xiaoman” that operates independently. Besides the independence, Du Xiaoman obtained its series A financing of USD 1.9 billion, valued at USD 3.6 billion. The investment was led by TPG Capital Management LP and Carlyle Group LP, and followed by Taikang Group (Insurance company) and ABC International Holdings Ltd (state-owned bank).
Benefitting from the good data infrastructure and accumulation, finance is considered as the best enhanced and developed industry under the circumstances in AI technology explosion. There are 126 investments with a total fund of CNY 48.5 billion (USD 7 billion) entered Fintech field from 2012 to 2018H1, according to ‘Investment Market Research on Artificial Intelligence in China 2018’ report produced by EqualOcean, finance is still a strictly-regulated industry in China, while policies may cast huge influences on the businesses. Tech giants like BATJ (Baidu, Alibaba, Tencent, JD.com) are more likely to be trusted by authorities because of their stronger technical capabilities, as well as much better data accumulation. Top Fintechs in the annual report issued KPMG are all from BATJ, except Tencent, which is not listed only because the company does not spin off its financial business as an independent fintech company.
Du Xiaoman’s potential for development could be expected in such a macro environment mentioned above. As an independent newcomer, Du Xiaoman actually still has a huge gap with the fintech leaders in China:
Ant Financial, valued at USD 150 billion, has its knock-out product Alipay, and the ecosystem of Alibaba is based on consumption with frequent capital flows.
Tencent Financial, valued at USD 144 billion by Everbright Securities, has its star product WeChat with over 1 billion MAU (monthly active users), and consumers use WeChat Pay at almost every corner in cities.
JD Financial (JD Digital) valued at around USD 20 billion, its business could also get huge help from consumers’ consumption on JD.com as well.
Du Xiaoman’s much lower valuation than the above three fintechs is not only resulted from its later spinning off but also related to the fact of its business situation. Born as Baidu Financial, Du Xiaoman had a weaker financial service foundation. Compared with Alibaba, Tencent, and JD.com, Baidu’s system of the personal account is much weaker, since users do not need to resign and log in for searching, while they have to do so for shopping on Alibaba or communicating on WeChat.
However, the author still believes in the potential of Du Xiaoman. The search service of Baidu could help Du Xiaoman gain a better understanding of consumers’ needs, then Du Xiaoman could cooperate with the merchants, that advertises on Baidu, to serve consumers together with financial service. For example, Du Xiaoman achieved great success in serving consumers in the education industry, and merchants like English training institutions or continuing education institutions need to advertise on Baidu.com, then Du Xiaoman could use this basis of cooperation to meet consumers needs for financial services.
July 4, at the Intelligent Finance Forum of Baidu AI Developer Conference “Create 2018”, ZHU Guang (朱光), the former Senior VP of Baidu and the CEO of Du Xiaoman claimed: “so far, only 1% of the financial service needs generated in Baidu scenarios had been met, the growth space would be huge in the future.” ZHU Guang also talked about the acquisition of potential financial service customers: users in the Baidu ecosystem, by searching for the information they need, truly express their needs on shopping, travel, MBA, vocational skills, renting, decoration, marriage, as well as financial management, investment, wealth management, etc. Besides the expression of real needs, a huge amount of needs for financial service exists, AI and Fintech would be the most appropriate solution for dealing with different types of needs.
Could Du Xiaoman build a strong user account system and then develop various sustainable financial service businesses? It is a question.
- Author: ZHANG Fan; Photo by WANG Meiwen; Write to ZHANG Fan at ZhangFan@EqualOcean.com