Alibaba’s top manager talks on Yuebao and internet finance

Fan Zhiming at Huxiu 2014 Fun and Money Festival

Fan Zhiming, president of Alibaba’s financial branch, delivered a speech at 2014 Fun & Money Festival hosted by Huxiu on December 22nd. Below are some highlights of his speech.

Today is December 22nd, a memorable date to me. On the same day last year, I reached an agreement with Mr Guo and Mr Zhou at Tianhong Fund on starting a business called Yuebao.

The buzzword of 2013 is “internet finance”. I think the booming of internet finance started exactly at the moment when Alibaba’s Yuebao was officially launched. Why did we do this? The reason was simple. Everyone is shopping on Taobao with the balance in their Alipay account, but how can their balance yield a return? We had had pondered over this question for years. As early as in May 2012, we were licensed to sell fund products by China’s Securities Regulatory Commission (CSRC). From then on, the idea of Yuebao began to emerge.

What can Yuebao do? First, it allows you to shop with your balance whenever you want. Secondly, it allows you to see your yields every day, something different from other funds. As a matter of fact, not many of us understand finance. Most people don’t understand investment. What does “7-day annualised yield” mean? Many people don’t get it. The innovative side of Yuebao is people can see how much return they are getting every day and they can withdraw their return every day. Such return that you can view every day, together with the convenience of purchase, makes people feel it is very convenient to put their money at our place. After all, the essence of internet is about convenience.

If you wouldn’t buy our product, is it because the return is low? I would love to offer something with high return. But even if I came up with something with 15% of return per year and no risk, would you buy it? Really? That is impossible. There is simply no such a product that is high in return and brings no risk at all.

Actually the yields of equity funds are considerably high. But why did we opt for something that is not that profitable but relatively secure? That is because we need to assure our customers our product is secure in the first place. Therefore Yuebao chose money funds.

Yuebao has shed light on today’s internet finance. Some say this new business offers room and opportunities for every company to thrive. Yet in my view, it is hard to develop a product like Yuebao. The birth of Yuebao owed much to the big data accumulated by Alipay over the last ten years. We have 300m to 500m verified users on Alipay. Only with such an amount of users can we enable our customers to buy our financial product within three to four clicks, and to withdraw within two to three clicks. This cannot be achieved in one day. It requires you to spend ten years accumulating users. So big data is vital to internet finance. Today, many startups and internet firms are trying to develop their own financial products. Actually this may take more than expected.

The birth of Yuebao is a substantial step of fund industries, as it connects funds and internet. Today, among the users who buy Yuebao on Alipay, 70% come from Alipay Wallet, our mobile app. 2014 will be a milestone for internet finance in the mobile front as well.

See full text (Chinese)