Ant Group – The Brightest Star in the Ecosystem Sky?
37 billion US dollars. With this issue volume, Ant Group, formerly Ant Financial, a Chinese tech group created by Alibaba founder Jack Ma, was to be traded on the Shanghai and Hong Kong stock exchanges. Ant Group is one of the world’s leading platform companies offering services such as online payments, financing or insurance services, such as Alipay. Alipay is now one of the world’s largest payment services, covering over 50% of the digital payment market in China (Hirsch, 2019). However, despite its success, the payment solution only accounts for a portion of Ant Group’s revenue, which now generates around 40% through other applications, such as credit or investment platforms. With more than 700 million users a month, the group processes trillions of US dollars every year. Ant Group’s IPO has recently been put on hold, officially due to non-compliance with disclosure requirements (e.g. financial information such as accounting, taxes and profit) (Zhu & Yang, 2020; Shaban, 2020). According to rumors, Jack Ma enraged Chinese President Xi Jinping and the Chinese government with critical statements about regulators, e.g., that they would be an obstacle and slow down innovation in the Chinese market. The authorities were reportedly unhappy about this statement and a connection to the failed IPO is suspected (Friedrich, 2020). After the largest IPO in world history, Ant Group’s enterprise value would have been an estimated $310 billion (Shaban, 2020). Many see new value creation logics, so-called business ecosystems, which Ant Group is said to have developed for itself, as being behind the rapid growth and the extremely high company valuation.
Ant Group – Is this Already an Ecosystem?
However, the assumption that Ant Group is an ecosystem should be treated with caution. Rather, Ant Group is a conglomerate of diverse subsidiaries with specific offerings. Through a sophisticated network of interconnected solutions, the company takes advantage of cross-selling opportunities. No less than 80% of customers use three or more Ant Group services (Wade & Teracino, 2020). A more detailed analysis of the individual platforms reveals evidence that often speaks against an ecosystem concept. In the following, we have analyzed individual platforms in more detail based on the work of the CC Ecosystem[1][2].
Alipay
In 2004, Alipay started as an escrow service to build trust between online buyers and sellers in the early days of e-commerce (Ant Group, 2020). Alipay now counts 1.3 billion active users (Wade & Teracino, 2020). The payment function is no longer the main focus. By now, the application counts as a “super app”, consumers use numerous other services via the platform, from food deliveries to garbage collection (Tudor-Ackroyd & Bray, 2020). In isolation, this does not constitute an ecosystem; many of the services are provided by Ant Group itself. However, numerous third-party providers are integrated into the app, e.g., Uber, Youku, or Takeout, which offer their own services as autonomous parties. However, with multilateral relationships between the various parties and the integration of independent complementary services, the app certainly forms the basis for the emergence of an ecosystem.
Yu’e Bao
Yu’e Bao is a deposit solution on Alipay that is entrusted with the management of capital. Linked to it is the world’s largest money market fund (Müller, 2020). The fund is managed by Tianhong Asset Management, which is 51% controlled by Ant Group (Tianhong Asset Management, 2020). The feature allows users to invest and access available capital in the fund on a short-term basis (Ant Group, 2020). Due to its organizational structure, the platform can hardly be compared to an ecosystem, and the solution itself can at best be described as a complementary service.
Huabei
Huabei is a platform for consumer loans on Alipay and is mainly used for financing the consumption of everyday products (Müller, 2020). On the one hand, it offers a cost-free 40-day payment target as well as installment payments with a term of up to 12 months (Ant Group, 2020). Controversy surrounds the methods used by Ant Group to boost Huabei’s retail business. For example, Huabei is often unintentionally deposited as a means of payment for online purchases, sometimes unnoticed by the consumer (Financial Times, 2020). Although Huabei cooperates with various financial institutions in the background, it acts as the main point of contact vis-à-vis the customer. Moreover, it is not a stand-alone service module, but a means to the end of supporting transaction processing. This means that the service is at most complementary in the respective context. Thus, it remains questionable whether a separate ecosystem will develop around Huabei’s financing solution.
Xiang Hu Bao
In 2018, Ant Group launched Xiang Hu Bao, a platform designed to address the lack of affordable health care for low-wage workers. In its first year alone, 100 million users joined the network (Wade & Teracino, 2020). Xiang Hu Bao offers a basic health plan to protect users from 100 types of critical illnesses. If a user becomes ill, he or she provides proof of this via the Alipay app and receives a one-time payment of up to 300,000 RMB (approximately $46,000 USD), which is divided among all users of the service and borne collectively. There are no insurance premiums or membership fees; for each approved application, Alipay charges an insurance fee of 8% of the amount paid out (Business Wire, 2019). Importantly, this is not an insurance product, but a digital claims orchestration mechanism based on distributed ledger technology (Ant Group, 2020). What is exciting about the solution, in addition to the technology-enabled risk pooling, is the integration of different players, such as insurance companies, who can distribute their own offerings through the platform (South China Morning Post, 2019). Due to the unique solution (it is not an insurance product) and the inclusion of other players, ecosystem-like structures are certainly recognizable, even if Xiang Hu Bao is rather to be seen as a partial solution of the Alipay super app.
MYbank
MYbank was originally launched to use Big Data and AI to lend to small and medium-sized businesses that were underserved by larger banks (Wade & Teracino, 2020). MYbank’s “310 loan model” is said to make it possible to fill out loan applications in 3 minutes and receive approval within a second, without any human contact – hence 3-1-0. Since its launch in 2015, 29 million small and micro businesses and individuals have been assisted (Ant Group, 2020). While MYbank cooperates with numerous financial institutions (which serve as sources of capital), it primarily places its own solutions, which are supported by Alibaba’s AI algorithms for risk calculation (Business Wire, 2019). This does not suggest any distinct ecosystem structures around the platform.
Zhima Credit
Zhima Credit is a commercial credit scoring solution. Based on a rating system that checks the creditworthiness of individual natural persons, users receive, for example, a deposit waiver when renting a bicycle or an overnight stay in a hotel, depending on the rating. To date, users have been able to waive around $15 billion in deposits (Ant Group, 2020). The solution is used by Ant Group as a supporting tool in various contexts to enable transactions between independent parties. While the solution could be part of different ecosystems, no ecosystem structures are evident around the solution itself.
Comparison of Ecosystem Structures Around the Individual Ant Solutions
Of the platforms examined, the structures around Alipay and Xiang Hu Bao can most easily be described as ecosystems according to the evaluation scheme applied. Especially in the case of Alipay, the multilateral relationships and the integration of numerous other providers (complementary services) can be observed. Xiang Hu Bao, on the other hand, is particularly interesting because of its unique orchestration solution, where needs (claims in the event of illness) are cleverly brought together with the available resources and further complementary insurance services from other providers are coordinated. Yu’e Bao, Huabei and Zhima Credit can rather be regarded as product solutions, the visible structures can hardly be described as ecosystems. The same applies to MYbank, which coordinates various partners in the background, which, however, do not appear to the customer as autonomous value-added units, but rather take on a classic supplier role.
Integrated Group with Ecosystem Approaches Around Individual Solutions
Ant Group is an integrated corporation that provides numerous proprietary solutions (often through subsidiaries) consisting of complementary products. By definition, a single company does not constitute an ecosystem (Fuller, Jacobides, & Reeves, 2019), even if individual subsidiaries appear to complement the offering in a meaningful way. Therefore, a more detailed analysis is needed for Ant. Here, it can be seen that while many of the platforms offer exciting technological solutions, ecosystem structures around the single solution cannot be observed. One exception is the Alipay platform, which integrates various third-party providers in addition to its own numerous products (e.g., Yu’e Bao or Huabei). It is questionable whether an overarching, common purpose or a basic service is recognizable here, which is a prerequisite for the formation of an ecosystem (Jacobides, 2019). On the Alipay platform, this purpose could at most be called “convenience,” because the app combines all kinds of colorfully mixed services. Whether this is sufficient, also in view of a clearly communicable customer benefit, should be discussed separately. In this context, Xiang Hu Bao is also an exciting candidate exhibiting initial ecosystem approaches, even if it cannot be clearly classified. It is therefore clear that the Ant Group itself does not represent an ecosystem, but ecosystem-like structures can certainly form around individual solutions. The Ant Group IPO mentioned at the beginning is far from forgotten: By 2025, China’s payments volume is expected to grow to $61 trillion, up from $29 trillion in 2019, when Alipay already boasted a 54.2% market share (Statista, 2020). Furthermore, in 2020, small business lending in China is forecast to grow to US$7.45 trillion, although Ant has so far only tapped into around 4% of this huge market. Ant has also expressed plans for diversification and international expansion. These trends are expected to further fuel Ant Group’s enterprise value, which is now estimated at around $200 million (Brian, 2021).
[1] The criteria for evaluating ecosystems were developed as part of CC Ecosystems research cycle 8 (state of work) and include: There is an overarching value purpose (shared value purpose); multilateral relationships between multiple parties are discernible; individual components of the offering are discernible as individual modules; actors are collaboratively involved in value creation (co-creation); individual actors are coordinated; complementary and supplementary activities are apparent; individual parties retain rights of disposal over their value contribution; an overarching infrastructure for interaction is visible.
[2] The analysis is based on publicly available information in English and German, first and foremost the website of Ant Group and the information available there on the planned IPO of the group of companies.
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