Interviewed By Genki Oka
Genki Oka, head of Japan at Ant Financial Services Group, in a refreshingly candid keynote, spoke about what drew him to join the Chinese e-commerce giants, its key achievements and how the company hopes to replicate its success by leveraging customer data and engagement to crack the uniquely difficult Japanese domestic consumer market.
Here is the transcript of the video.
Good morning. Great. Thank you very much, for the very kind welcome. Good morning, everyone. My name is Genki Oka. I am head of Japan for Ant Financial Services. It’s a pleasure to get the introduction because whenever I say I’m from Ant Financial, most people have no idea what I’m talking about and where I’m from. But when I use the word “Alipay,” at least the Chinese folks in the room will say: Ah, okay, I know where you’re from.
So yes, as introduced earlier, we have changed our name to Ant Financial. And the biggest reason behind this is the fact that we want to be and we think we are no longer just Alipay.
Joining Ant Financial
Let me start off by introducing myself so you all know where I am coming from, starting roughly 20 years ago. This is a completely different picture of who I am today. Much thinner; I had no beard back then, 20 years ago. And I had just started my career in professional services. There’s a reason I wanted to start here. First of all, I did work for a company that is probably the most famous company in the world today, so I’m sure you guys have a few names going through your mind. And that company is Lehman Brothers.
This is where I started my career. And as you all know, they no longer exist. But I did have a pleasant experience starting my career at an investment bank. As you know, 20 years ago, there was a very famous book called The Monkey Business, that illustrated what investment banking was like, and this is exactly who I was. I was an Excel monkey in front of the PC. The reason I bring this up is because the team I was in was the M&A team. We were located next to the library of Lehman Brothers.
That library had all the publication media magazines that you can think of in the world. And one publication always stood out for me, which was The Asian Banker. It had a beautiful cover, and I would take it in my hand, I would stand in front of the Bloomberg Terminal, type in all the ticker codes and pretend as if I was reading it. To be honest, I didn’t really have an idea; I didn’t understand what was written in it but it did look cool. So that was how I started my career.
It was an honour when I was asked to join this conference hosted by The Asian Banker. So, let me start a little about my experience in fintech and why I am so intrigued by this sector. As introduced, I was a partner at McKinsey for some time; over ten years. This was when I first encountered this industry, in Japan, actually. I had a client that was a very traditional securities firm that was about 99 years old, about to welcome their century since their business started. They had one mandate. The team wanted to join fintech, like everybody else and they had no idea.
So they thought it would be a brilliant idea if they found a partner. So they sat down with an internet company, and it was exactly like in the movies, like you would expect. You had the suits, you had the ties, and you had the tee shirts and the hoodies on the other sides. There were a lot of reasons behind this, and this did not panned out. I'll talk about it a little afterwards. But this was a fascinating moment at least for me personally when I realised that this is going to start happening everywhere.
This is not just one meeting in Japan where the CEO says we have to investigate; this is going to take place everywhere in the world, including Japan. This was also the reason why I was more and more intrigued in understanding how this space was going to develop. So, my next stop was at SoftBank. I was working in Silicon Valley. Some of you might know an executive by the name of Nikesh Arora, who was my boss. I was working with him to design the globalisation of SoftBank, and as you see in the press they are making a lot of headway.
But this was also a point in my career where I had the privilege to oversee Yahoo Japan, and also many of the ridesharing companies like Did, Grab, and others. So because of that, my career shifted much more into the internet space. But with my financial background, I was a little more comfortable in working with Yahoo Japan and others, thinking through wallets in Japan and other alternatives. But this was a good segue, at least for me to seriously consider a career purely in fintech.
I joined Ant Financial probably because I have spent 20 years in the U.S., 20 years in Japan, and China was this mysterious country. I had been there; I'd been to Shanghai but I had no idea how it really operated. I knew about this company because SoftBank is affiliated to Alibaba but I really had no idea of the sharing of force and the level of innovation that was happening within.
Convergence of technology and financial services
So today, I wanted to share a little of my observation regarding the industry, and also the observations from Ant’s perspective. So this, to me, is very important in terms of how the industry is developing. On the orange side, you see financial institutions who are trying to take the original financial system and improve through technology. That is happening. But that is happening on one end.
A completely different thing is happening at the other end, where technology companies are actually trying to rebuild the financial service system through technology. These are all verbiage but when I see the realities today, I actually do think that there are two big industries converging into one. And because of that conversion, there are a lot of things like innovation both on the technological front and the business model front happening. But at the same time, it’s becoming a cultural shock for many.
Because like in the earlier photo of the suits and ties versus the hoodies and the tee shirts, they don’t necessarily speak the same language. The one thing that I do want to point out is the fact that many of the financial institutions, in my personal opinion, worry a little too much about the regulatory side of things, when it even comes to fintech, which is prohibiting at least a lot of the partners that I speak to from taking risks or trying new things.
On the other hand, it’s not as if the tech companies are doing everything well. They are also worried too much about the technological innovation. They worry less about the business model innovation, which, in my mind, is much more important for this industry from both sides to start changing.
So let me show you an example. Some of you might be from Indonesia. This is not just Indonesia, but many of the developing countries are experiencing this and we have looked at multiple models where this alone is the payment landscape. As you can imagine, hypercompetitive, everybody’s out there trying new things. And this has been the starting point for developing countries.
The next phase after this, let me show you the example of the U.S. The U.S. has evolved from a hypercompetitive situation to something that looks like this. As you all know, there is a big bank, Wells Fargo, and by looking at the logos, you might actually know many of these companies. So rather than having 20, 30 companies per function capability, what has happened is there are only one or two best practices that have been made and that have survived the competitive landscape and are now becoming actually a household bank.
The one exception that I do want to point out is Ant in China. So, Ant’s mission, and I think it has a lot to do with this mission, is to bring small but wonderful changes to the world by making financial services accessible to everyone with technologies. The key word for us at Ant is everyone. It is the inclusive aspect of the mission.
So rather than me trying to explain about Ant and Alipay, let me start by showing you a brief video that does a good job introducing what it does today.
Alipay is operated by Ant Financial of China, one of the world’s largest fintech companies. As the name suggest, Alipay is a way to pay for goods and services online. But now, it’s more than that. It’s a global lifestyle super app. It is used by more than 5 percent of the world’s population. Amy and Dayu are going shopping. They use Show-Show find nearby merchants and special offers. Amy shows her unique Alipay code and has it scanned; done!
More than 60% of the transactions processed by Alipay are conducted on mobile devices. Alipay is helping businesses large and small to connect to a cashless world and the massive number of Alipay users.
Dayu has just enjoyed an exclusive 5% discount. Across the city, Amy’s mother is a keen investor. Yu’e Bao is an online wealth management product which offers users high on returns on their current account balance. Ant Fortune is a comprehensive wealth management platform that allows users to manage their finances using an array of products, no matter how small their investments are. With Stock, she can monitor her position anywhere at any time.
Travel is another key function offered by Alipay. Users with a higher Zhima credit score can book a hotel without a deposit. Actually, Zhima Credit offers individual credit filing and scoring services in China. Big World shares overseas merchants’ information and special offers, and AliTrip offers travel packages. More and more merchants across China and around the world are accepting Alipay. Koubei allows users to look for local merchants and restaurants, place orders, and write reviews. Their friends split the bill with Go Dutch. It’s an evolution of how people interact with each other about money.
Now it’s time for Amy and Dayu to go to the airport. Millions of taxis accept Alipay across China and overseas. There are so many other functions to explore, from booking movie tickets, or food deliveries, to paying utilities, transferring money on the go, and many more. Alipay is the global lifestyle super app.
Creating a lifestyle company through different financial products
Thank you. Let me briefly go through the service line-up of Alipay because it has made a lot of headway in recent months. First of all, as you saw in the video, we hate it when we think of ourselves as kind of an Alipay, on-payment company. So we have gone beyond that to where we are not just a payment, but also a lifestyle company. This was very clear to me when I was actually interviewed for this job. Because I sat down with our CEO and I started talking about the payment landscape in Japan, how it was very competitive; it was a lot of ease of use, all of that. The CEO had absolutely no interest in listening to what I had to say.
But when I started speaking about lifestyle, when I started talking about the possibilities of leveraging Alipay platform to countries outside of China, this was when his face lit up and he stood up, and he was all happy and talking about his passion and mission. It comes straight from the top. This is exactly where the company is heading, and this is exactly where we believe would be more potential for us down the line.
The second one that I do want to introduce is called Ant Fortune. If you’re from China, you all know and I’m sure you’re very knowledgeable about what’s happening in China. There’s a product called Yue’bao, which this year has become the largest money market fund (MMF) in the world. The most fascinating about that to me was when I went to a rural part of China to interview an 80-year-old grandma.
I did this because as you all know, Japan is going to go through a hyper aging phase where the population is going to be on the decline, and you have to think of ways to serve the elderly. In China, when I spoke to the 80-year-old grandma, I asked her what are the three things that she enjoys doing in life. She said the first one has to have tea with her friends. I thought: oh, great. The second one is to go on WeChat to communicate with her family. WeChat is a big competitor so you can forget that, and I forget that.
The third one was actually to go on Yue’bao and check her daily balance. Because Yue’bao on Alipay actually shows how much of your asset has grown compared to yesterday. It’s not a big number; we’re talking about an 80-year-old grandma in a rural part of China so you could probably by a bottled drink, here. But the fact that there’s transparency and change, and you are notified and you can get that info has been able to generate the stickiness that we were looking for.
And in that sense, we think this is a highly promising product because when we use the word “investing,” even me personally, I have invested before but am I a big fan of investing? Well, maybe not. Because it’s just too much time; it takes my attention away from other things. But people don’t view this as an investment vehicle. They view this more as a wealth management, asset management option. Limited risk, and there is some change; maybe it’s not that big but it’s attractive enough to move it out of your bank account.
The third one, MyBank; this may be directly relevant to your businesses. This is an SME loan business, which is also highly successful in China, thinking of ways to do it elsewhere. There’s a principle behind SME loans, which we call 3-1-0. 3-1-0 stands for three minutes from application to approval; so that only takes three minutes. One is the funds get released to your account in one second. The zero is actually zero human interaction. As you’ll see later on, artificial intelligence (AI) on the technological front is a very big priority and a focus for us.
The fourth one, Consumer Finance, is what you would imagine consumer finance. The fifth one, insurance, has started in Alibaba guaranteeing the delivery of the packages, whether it’s not damaged, whether it comes on time, etc. So it’s a one RMB insurance, meaning it’s probably 20 cents of the dollar. And that is moving into insurances like auto insurance, and as you can imagine, many more to come.
The last one, Zhima Credit is actually one service that is fascinating at least even to us internally. You could think of it as FICO score in the U.S. So in China, there is no credit reference but Zhima Credit is serving as that reference. If you’ve been to China, you know when you check into a hotel you have to pay a deposit that is actually a larger amount than the amount you will pay for the entire duration. I thought that did not make sense, but I got used to it.
With Zhima Credit, what happens is when you check in you show them your credit. If you’re creditworthy, you do not have to pay the deposit. A lot of the hotels are using this; this is very clever. But what I like about it is the fact that this is being integrated into the social infrastructure. So nowadays, you have the younger generation organising dating parties based on a certain credit score. So they say okay, you’re 700 or above; come join us.
Show us that you’re 700 and above. Then you can meet a guy, you can meet a girl; he or she would be 700 or above. That means he or she would most likely have a stable job, most likely is paying the bills on time, and is trustworthy. So this is exactly the behavior that we hope to gain and the fact that we are gradually moving into the social platform environment infrastructure, is a very positive news for us.
One thing that we still constantly focus on is our core product, Alipay. Alipay, as mentioned earlier, you can book a restaurant, you can choose your menu, you can pay on the spot, you could get a taxi, you can get movie tickets; you can do anything you’d like paying public expenses. This is the model we would like to pursue in other countries, as well, outside of China.
Since one of the topics of this conference is technology, I just want to introduce a few of the roadmap, at least for us, up until today. As you know, while internet big data has been a big aspect, the one thing that has helped us tremendously is cloud computing. This has enabled us to reach the scale today. One thing that we continue to focus on, and it could be the most important thing on this page is AI. Because of the fact that this is also scalable.
And then AV/VR, we are one of the few companies I think in fintech or financial institutions that have tried. I would not say this technology is established and engrained in the surface but we are trying. And there are interesting services that are encouraging.
So let me show you a slide about Alipay. One billion payments processed, 600 insurance policies sent, 30 million users being released of personal loans. If I saw this chart a few years ago, I would have said wow, this is a very big number; is this the entire 2014? No, this is actually the number Ant and Alipay processed in a day in 2016. One day. As you can imagine, this means we are talking about a billion plus processing. So do the math, it’s milliseconds.
This was only made possible because of the fact that we have focused, we were successful, and we successfully understood that cloud computing would be important; that was the key to success to all of this. But the fact that this has been enabled at peak day last year has put tremendous pressure on us internally because we run in a culture where last year’s peak has to be the norm for the next year. So hopefully we’ll see that this year as well.
Using artificial intelligence and other technologies to boost customer engagement
AI, it’s an interesting topic; everybody’s talking about it, including myself. I really sometimes had no idea what it meant, but I have a grasp nowadays that we are leveraging it in many places. I talked about the lending example, so that was one example. Zero human interaction, 400 million SMEs processing through dealing with AI. Another one is security on the anti-fraud front. We are kind of in the basis points area.
The one thing that I found interesting is this one that you see on the lower left hand side; customer service. I showed you the picture of the processing power that we had in a day. Which means if we’re processing a billion-plus transactions, we’re going to get millions of inquiries. Where is my product? When is it going to come? The payment didn’t go through; etc. So we did get those, in that peak day. My understanding is I don't remember the exact percentage but something like 98%, 99% plus of those transactions were supported by AI.
I said okay, maybe that’s possible through chat box and messaging. But no, I realised that the majority of these are phone calls. These are phone calls calling at customer support; AI is answering. And what I did was afterwards obviously talked to the user base and said did you guys realise that it was an AI that you were talking to? No, not many. So that’s the level of innovation this has reached. As you know in the press, everybody is digging deep in this space.
This one, I think we were one of the few that tried and tested this out. If you’re a Pokemon Go fan, you’ll look at this and say okay, I know this great. But this is Alipay trying to implement augmented reality in our app. In China, especially between Chinese New Year, there is a custom around red envelopes; giving and receiving money to family and friends.
You could actually embed your red envelope in a physical location, and it could even be the logo of your merchant. As long as you have an Alipay app, what you can do is you can walk around and you can scan that location, and then you’ll retrieve the coupon or the e-money contribution.
As you can imagine, what we tried to do was to add some fun into just a normal B2B process. This has also enabled merchants to guide traffic, which has also worked in our favour.
The goal of Ant Financial is something like the following: we aim to serve two billion customers on our platform in ten years; that’s what we’re striving for. We will do this twofolds. One is to make sure that Alipay can be used. If you get in a taxi here in Tokyo, you’ll be able to use Alipay. If you go to a few of the convenience stores, you will be able to use Alipay, things like this; financial acceptance.
The other interesting aspect is on this side, which we have already announced. The one thing I do want to clarify is we have not acquired companies left and right but we have partnered with companies left and right. You see us in the Philippines, you see us in Thai, you see us in Korea, and you see us in India. These are all settings where we as Ant Financial have a minority position. Because the whole philosophy is not about driving this identity of being a Chinese fintech company.
The whole philosophy is to make sure that we use the technology to enable the local partner. That is how we would like to proceed going forward.
So, just a few more pages on the last bit about Japan, since we’re all in Japan. As you all know, Japan is a country where the e-money space is rapidly growing; roughly 25 give or take plus percent over the past five years. Going forward it’s also viewed to be 20-plus percent. The headwind working in our favor is something that you would probably expect. You don’t need to carry cash, no points, very easy.
The tailwind is what I thought was interesting. First of all, the majority of the population, and when I say majority, 70-plus percent, actually don’t feel that e-money is not necessary. So this is going to be a huge hurdle for us and for the industry players and us to overcome.
One other thing that’s interesting is the fact that it is so easy to use. Right now because of Sony’s Felica technology, everything is a touch and go process. But because this is so easy, it has created a different pain point where the user can’t really check how much money they’re spending because it’s prepaid. This has led to actually less and less usage. This is also probably why the mobile penetration is also low. It’s at 10%. So that means every e-money player is using the credit card-looking magnetic, plastic stripes to touch and go.
You might think we’re advanced from China; it’s clear that Japan is very, very far away in terms of where it needs to be. Therefore, it’s actually good in terms of the opportunity.
These are offerings in Japan from the transaction point, from the highest to the lowest. So as you can see in green, the major players are all NFC, meaning touch and go, Felica technology, and it’s either Sony or like Android Pay and Apple Pay. We think this is a big issue in Japan, and this runs the risk of Japan becoming or remaining at a Galapagos, a famous or lovely word people like to use in Japan, where we are just left behind in terms of the global standard.
And we hopefully are here to change that. The reason why we think this is not a good idea is because a touch and go is a very easy to use solution, feels nice, very fast. But it does not store the data. It’s very hard to store the data. The merchants, first of all, don’t have access to the data. So they’re just buying the convenient experience and they are getting no knowledge or insight in terms of the customer.
That is where we are. We can’t go down that road. And to be honest, Ant Financial actually does have an NFC solution and the vending machines in our campus actually work with NFC. But when it comes to the global strategy, probably not the way to go.
We like QR. Why? Because you could use it for promotions. You could generate dynamic QRs to give them a customer-specific mode. You can use it for shopping; you can use it for ordering. The biggest reason behind this, I do want to point out, which is probably the last point that I want to make in this conference; is the fact that we have launched so many financial products, a lot of the bankers, financial institutions look at us and say wow, Alipay or Ant is doing a good job cross-selling. That is the opposite of the philosophy that we operate in. I think that is one of the reasons why we were successful in rolling this out.
For us, it is absolutely about customer engagement. It is about outlets and channels that enable us to obtain the behavioural and use this data for the benefit of the user. That would be the direction that we will continue to head down the line, and therefore technologically, we will promote and leverage technological options that will enable us to do that. But for us, and I think for the industry going forward, the customer engagement side is going to be much more important than individual services that we will be offering.
That’s it. Thank you very much for your time.