Release Date: Aug 25, 2017

Over the past five years, FinTech companies have been evolving themselves into comprehensive FSI(Finance, Securities and Insurance) providers. When most of the companies step into services like lending, credit, consumer finance, etc, FinTech seems to finish its first half, and enter into the 2nd half very soon.

In China, after a savage growth, Chinese FinTech companies are big enough for the government to introduce severe regulations towards FinTech companies to avoid risks, recent tactics like “Net Union Clearing(网联)” is one of the cases. Here are some figures:

In India, payment and lending plays a big role right now, but we can see the innovators are shifting towards two directions:

• Besides lending, more and more companies try to provide services in consumer finance, insurance business taking advantages of big data and AI technologies
• Offline will be the next battlefield. By enabling offline payments, FinTech companies can cover more consuming scenarios to get more user, transactions, and new business models

Let’s see how Chinese leading FinTech companies are playing the offline market.

In China, there are tens of millions of offline businesses and services, such as restaurants, retailers, chain stores, shopping malls, cinemas etc., who are very active for day to day transactions. This is a market that Tencent and Alibaba cannot ignore. How will they act to take this market?

Similar 3rd Party Strategy Towards Offline Market

Although WeChat Payment and Alipay have enabled the functions like “Collecting Money from Strangers”, or a company can integrate with WeChat Payment or Alipay to enable their own mobile payment initiative, from 2015, both Alibaba and Tencent adopted a similar strategy to get the offline market by more relying on 3rd party mobile payment vendors. This is the business model of a typical 3rd party vendor:

• Using open platform from both Tencent and Alibaba, 3rd party vendor can enable an offline merchant to collect money from consumer’s Alipay, WeChat Payment wallet or any other existing online wallet using a single QR Code. The solution is named “One-Stop Payment Service”
• 3rd party vendors will be responsible to market and sell the solution to various offline businesses and services
• Consumer will freely choose whatever payment method they prefer when checking

And the following are how the vendor can make money out of the service:

• Charge Rate from merchants
• When consumers using WeChat Payment through a 3rd party vendor, the consumer will become the subscriber of 3rd party vendor’s WeChat Official Account, then with the power of the WeChat Official Account, the 3rd party vendor can:
  • Publish advertisement content
  • Operate a small e-commerce platform
• Tencent and Alibaba split their marketing dollars to these 3rd party vendors for supporting different marketing campaigns, like subsidies, red packets, etc., in order to enlarge their own market share

There are a couple of famous vendors in China, each of them connects tens of millions of offline businesses every day.

Let's look at the landscape panorama from both India and China markets in the following chart.