The Bank of the Future

March 2018 Citi GPS: Global Perspectives & Solutions © 2018 Citigroup 41  Driving Platform Effects with comprehensive products – Sesame Credit – launched January 2015, in 11 months to >100m cumulative users – Yu’e Bao – launched June 2013, in 20 months to >100m cumulative users; – Insurance – launched November 2010, in 31 months to >100m cumulative users  Yu’e Bao: convenient cash management service – This money market fund provides convenient cash management service for users and provides a foundation for other wealth management services. Yu’e Bao is the largest in the world, with assets of ~RMB1.5 trillion (~$230bn) and a cumulative user base of about 330 million, which translates to an average c.RMB4,500 ($710) per user. Yu’e Bao’s real advantage is its strong technology edge, which enables high- frequency usage owing to great user experience and ever-expanding user scenarios. The platform also benefits from Big Data, which helps in liquidity risk management, such as analysis of future redemption ratios.  Zhao Cai Bao: P2P lending platform – Started in 2014, the platform lets small businesses and individual borrowers directly raise loans from investors provided that a financial institution has guaranteed the loan and made sure money will be paid back (each loan is divided across a maximum of 200 investors). Average loan sizes are ~RMB70,000 ($11k), with durations of 3-12 months and annualized interest rates of 3-5%.  Hua Bei (Ant Check later) – Launched in December 2014, Hua Bei is an online consumer loan product offered to Alipay users for purchase of goods or services approved by Ant Financial (usually at Taobao or Tmall). The maximum lending amount is up to Rmb30k ($4,750), with an interest-free period of 50 days, and average loan size is ~RMB3,000 ($475) per borrower. Huabei has achieved good synergy with Ali’s e-commerce platforms by effectively promoting one’s consumption. As of the first half of 2017, the outstanding loan balance of Hua Bei reached Rmb160 billion ($25bn). Meanwhile, the big data derived from the transactions via Hua Bei also allows Ant Financial to provide more customized financial services to its customers.  Jie Bei – Jie Bei is an online cash loan product launched by Ant Financial in 2015. The loan applications are made on the Alipay platform, with loans being directly transferred to the borrower’s Alipay account. The credit line ranges from Rmb1k to Rmb50k (~$150-$8k), with typical loan duration of up to 12 months, depending on the borrowers’ Sesame Credit Score, and average loan size is c.RMB700 ($110) per borrower. As of mid-2017, the outstanding loan balance of Jie Bei had reached ~Rmb100 billion ($16bn). However, Ant Financial suspended the Jie Bei service for certain users in early 2018 as a result of regulatory tightening on cash loan products and imposed a leverage cap for online micro credit companies (MCCs) by including all loans financed via off-balance sheet ABS (leverage of Ant Financial’s MCC subsidiaries – i.e., the lending entities for Huabei and Jiabei – reached ~70x as of 1H17, compared to the regulatory cap of 2.3x).  MYbank – Launched in January 2015, MYbank offers three kinds of loans that tie in with Alibaba’s core businesses: (1) for people in rural areas; (2) for Internet start-ups, and (3) for Tmall/Taobao sellers. MYbank strictly operates small/mid- sized ticket loans and does not accept any loan application over RMB5 million. The bank offers no physical branches and operates entirely on a cloud