How Alipay changed the way China invests and helped a fund grow 400+ times over
Part of the “Alipay in China” series about how this all-in-one mobile payments app, operated by Ant Financial, is transforming digital lives in China
What do you usually do with the spare change in your pocket: the dimes and dollars (or euros, yen or dong notes) weighing down your purse or wallet as you went about your daily business?
A few years ago, Alipay’s e-wallet started allowing users in China to conveniently transfer these unused cash into a money market fund, at as little as one yuan at a time (about 15 cents in the U.S.). This spare cash management platform became known as Yu’e Bao, or “leftover treasures”.
From one fund in 2013 (which grew to become the world’s largest by 2017 and now has 588 million investors — or a third of China’s population), today’s Yu’e Bao platform hosts a growing selection of such funds, forever changing the way users manage their spare cash.
In a report last week, the South China Morning Post noted how assets under management grew 80 times on average for 13 of the money market funds on the Yu’e Bao online cash management platform. Since May 2018, Yu’e Bao’s technology platform has begun integrating money market funds alongside the platform’s original fund managed by Tianhong Asset Management.
“Those computational infrastructure and big data analysis are being brought to bear on managing Ant Financial’s funds. Liquidity prediction and management technology help fund managers plan and execute their investment strategies better.” — South China Morning Post
That was as Alipay embarked on a push to make finance more accessible to the masses, sharing its technology with traditional financial institutions and ensuring they’re able to handle massive volumes while keeping the experience seamless, with the tapping of just a few icons within the app.
One of those funds in particular grew by 418 times — or more than 40,000 percent, in the six months since it was added onto Yu’e Bao’s platform.
(Check out that growth trajectory in the chart below)
Including the original Tianhong fund, there are now a total of 20 money market funds on the platform, among which six were newly introduced in 2019 (hence no growth figures for those were available).
For users, one of the biggest conveniences is that they can directly use the money inside Yu’e Bao to pay for online and offline purchase through their mobile phones.
The simplicity of putting money into the platform and its low-entry threshold also means it can attract investing novices and those with lower incomes, many of whom, mostly likely, have never heard of wealth management before.
That’s compared with high entry barriers set by financial institutions traditionally. For example, before the Yu’e Bao platform came along, most wealth management products required a minimum buy-in of RMB 10,000 — two-thirds the disposable income of average rural Chinese residents in 2018.
In fact, even as early as five years ago, New York-based finance and investing news website TheStreet.com was already describing the Yu’e Bao platform concept as something that can resonate with the young and the tech-savvy, not just in China but even in the United States.
“That’s the ticket for millennials, Chinese and Americans alike, who don’t necessarily have the capital to put in the stock market or investment alternatives. Still, they’re frustrated that low interest rates are delivering measly returns on their savings. An online asset management situation like in Yu’e Bao is the no-frills answer to obtain secure and robust growth while catering to this demo’s tech-savvy tendencies.” — TheStreet
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