► The Baidu-backed company still lacks core competitiveness among main players in the industry, such as Ant Technology and JD Digits.
► The encouraging potential in the entire fintech industry provides a lot of large room for Du Xiaoman to grow.

In the previous article, we introduced the development path of Du Xiaoman Financial. Here, we explain its market position among the smart finance industry and go over its future opportunities in the consumer finance market. 

The necessity of strengthening barriers among competitors

In the to-B business competition, Du Xiaoman has certain advantages. Supported by the Baidu ecosystem and its technology base, the company outperforms competitors in terms of the traffic and data volume. 

However, technology is what makes a real difference, and this has to serve the financial industry. The main players, Ant Technology, which is supported by Alibaba’s empire, JD Digits, which is backed by JD.com, and even the rising star – the Tencent Fintech – are all showing great interest in ‘AI+ Finance’, although with different entry points in the fintech industry.  Moreover, all of them have years of experience in finance with a certain number of successful commercialized projects and significant number of to-C clients. For example, Ant Technology and Tencent Fintech have an over 1 billion of individual client base, which way outperform than the figure of nearly 400 million for Du Xiaoman. Fair to say, in the smart finance field, Du Xiaoman still has a long way to go. 

When looking at the valuation, there is a lot of room to grow for Du Xiaoman. Take Ant Technology and JD Digits as examples  – both are operating independently operating from former parent companies,  with valuations of CNY 1000 billion and CNY 130 billion respectively, overrunning the figure of CNY 20 billion for Du Xiaoman, according to Hurun Unicorn List 2019. In fact, JD Digits is already worth around CNY 200 billion after the change in ownership this June. 

For financial institutions, technology is not the only factor for choosing a partnership. The database, the successfully commercialized projects and the individual client number are all crucial. For Du Xiaoman, the solutions and services are similar to other players that, who also have coverage on risk management, intelligent client attraction, smart client representatives. Therefore, deeply exploring more diversified services with differentiated products will be a way for Du Xiaoman to erect its barrier in the industry. 

Future opportunities

Though the competition is likely to get fiercer in the entire fintech field, the consumer finance and smart finance industries are still in their early stages. Seizing the opportunities in a timely way can also help Du Xiaoman to maintain its position or even grow larger. 

The entire financial services industry is transforming into an online-based entity with more comprehensive supervision and systematic organization. 

Financial services are moving online  

The Chinese government stated the growth rate for small business loans from large commercial banks should reach 40% in 2020, which requires the banks to master their risk management capabilities. The higher requirements from the government is urging the banks to ask for third-party companies in technology support, especially in the credit review process, which was dependent on offline manual work. 

This provides large opportunities for fintech companies, who run the business in consumer finance, such as Du Xiaoman, in many dimensions. 

Because of the similarity between a small business loan and a personal loan, which are both high risk, with fewer or no collateral and hard to screen, consumer finance companies can provide experience-based business models and solutions for banks. Du Xiaoman, for example, has been focusing on personal credit services for years, along with technology screening solutions, which will play an important role in better promoting small business loan services to meet the government’s requirements. 

Moreover, the formally manpower-driven credit review process requires large investments in labor but still has low efficiency. Fintech companies are adding fuel for banks in the technology transformation to the machine-reviewing process. Especially in the COVID-19 period, the ‘robotic callers’ from Du Xiaoman saved 30% of the labor costs for clients in March. 

The increasing number of small businesses and the lower thresholds for borrowing also pushed up the demands for credit loan services. 

Driven by the pandemic, people are spending more time online and have started getting used to it. Online investment and financing, another important business of Du Xiaoman, has significantly benefited from this trend. 

The consumer finance services are gradually moving to the online space, where fintech companies are playing a crucial part.

Financial Services are becoming more systematic 

The increasing pressure on the regulatory side and the comprehensive application of high technologies are forming a more orderly financial industry. 

The encouragement from the government on mass entrepreneurship has prompted a series of default rates, which will be more convenient for loan-providers such as Du Xiaoman. The central bank also increased the loan proportion for larger commercial banks to provide more fund support to small businesses. 

What is more, the application of AI and big data makes the online credit system more controllable and efficient. Take ‘Panshi,’ an open platform of Du Xiaoman, as an example. The technology-based solutions on receivable collection help the financial institutions to save 40%-50% labor force, with the number of daily calls from robot callers similar to the figures from 300 human collectors’ daily workload.