Corporate Convergence and the Rise of Platform Economy in China: A Fin-Tech Case
Compared to the traditional financial businesses, the fin-tech sector has always been labeled as "the alternative". Also, fin-tech companies usually fall in the category of startups―small companies with a contingent future. Yet, Ant Financial, the fin-tech company derived from Alibaba, seems to have broken this stereotype. With a valuation of US$150 billion, Ant Financial provides a variety of financial services including payment, loans, investment, and insurance to more than 500 million users globally. The finance sector in China is well known for conservative control by the central government. Compared to its counterpart in the West, the Chinese banking industry is lagging behind in terms of marketization and modernization. What makes China a giant in the fin-tech arena? What can the growth of Chinese fin-techs tell us about the political economy in China?
In our paper, The Ant Empire: Fintech Media and Corporate Convergence within and beyond Alibaba, Mai Anh Doan and I take Ant Financial as a case to study an ensemble of multiple factors that enables the rise of Chinese fin-techs. First of all, Chinese fin-techs are based on a huge IT infrastructure collectively constructed by the state and the private sector. The pervasive use of mobile Internet paved the way for the rapid development of fin-tech market. In the meantime, Chinese consumers, particularly the younger generation, are very open to innovative financial services and they pick up digital services very quickly. The digital-based wealth management culture contributes to the invention and diffusion of financial technologies.
In addition to these technological and cultural settings, corporate convergence plays a pivotal role in the commercial success of Ant Financial. This article understands convergence as arising from the technical blurring of discrete business models. Data-driven technologies allow the company to utilize the user data accumulated from existing businesses to establish new business categories. For example, Alibaba rolled out the digital payment service Alipay based on the algorithms of the user data collected from its e-commerce business, namely Taobao and TMall. The rapid growth of Alipay then enabled the digital investment platform Yu'ebao which turned the Alipay and Taobao (and Tmall) users to investors who constitute Tianhong Fund, the largest money market fund in the world. The utilization of users data for the development of a multi-sided market leads to what Langley called "platform capitalism" (Langley & Leyshon, 2016). While the large corporations all have chosen to embark on the digital-driven process of convergence, increasingly fewer actors control more business areas. As designers of the platforms, those corporations who control data and algorithmic technologies have increasingly more power to steer the development of the overall economy.
Convergence is not only a business strategy that has been applied in various industries but also signifies the collaborative relations between the government and large IT corporations. Coined in the 1960s, convergence (Galbraith, , 2007) referred to a pragmatic choice that the US government took to enhance efficiency in the post-cold-war economic construction. Technology advancement was a pillar for economic development and it usually requires large scale investment collectively managed by the government and large corporations. Consequently, centralization has been a transcending logic running through policy-making in various domains. A particular industry, the national economy, or the governance of the society has been centrally planned by increasingly fewer actors who have obtained growing economic or political power along with the converging processes of various kinds.
The Ant Financial case reflects the government's support to the early development of the fin-tech industry, specifically from 2012 to 2014. During this time, the government considered fin-techs a new business category that uses the Internet to enhance the social outcome and economic efficiency of the financial sector. (That's why fin-tech in China was initially called "Internet finance", Wang, 2018). For example, Internet finance could enhance capital liquidity in the overall financial system when they cover the small and micro enterprises that have been locked out of the traditional banking system.
Since 2015, the Chinese government has taken "Internet finance" more as a financial service than as a technological intermediary, and it has started to regulate the fin-tech sector. The policy environment became much more complicated than before. These policy changes will be addressed in a forthcoming article, "The Party must strengthen its leadership in Finance!": Digital Technologies and Financial Governance in China’s Fin-tech Development.
Jing Wang, Assistant Professor in Interactive Media Business, NYU Shanghai