Nine years ago, in a conversation with Baidu's CEO Li Yanhong, Richard Liu, the Chairman of JD Group, openly revealed an ambition: 70% of JD's future profits would come from finance.
True to his words, JD's financial services experienced rapid growth for some time. However, its plans to go public three years ago were put on hold due to regulatory overhauls targeting platform businesses, pausing Liu's financial aspirations.
But on August 3, JD's app discreetly rolled out a new fund section, with numerous institutions already establishing their presence. JD Tech, carrying Liu's financial dreams, has been taking consistent steps, hinting at something distinct on the horizon.
With the ongoing rectifications of platform companies and rumors of Ant Group's listing plans, JD's financial operations can finally reboot.
Liu hasn't given up on his dream of building a fintech empire. Within his vision of having three companies with revenues exceeding a trillion and net profits over 70 billion in the next two decades, and five companies making it to the global top 500, JD Tech holds a prominent place.
Testing the Waters
The integration of the fund section into the JD app has been surprisingly low-key. As sources from Wall Street Journal revealed, currently, only a subset of users can access this section. The interface seems similar to other finance apps, with various sections like "Small Gold Vault", "Stable Finance", "Advanced Finance", and "High-end Finance", spanning currencies, fixed-income, equities, and more.
Industry insiders view this move as JD's effort to intensify its financial management services. Some from fund companies noted that as JD Tech prioritizes its financial services, leveraging the JD app's traffic to cater to diverse financial needs can significantly boost its fund sales revenues.
For a long time, JD's fund sales were only available on the JD Finance app, primarily through JD's Kentrucky Fund Sales Ltd. In comparison to dominant consumer platforms like Alipay and strong social platforms like WeChat, JD's financial app lacked a competitive edge.
Data from the China Securities Investment Fund Association shows that in the second quarter of this year, Ant's fund sales company led the industry with a scale of 1.2667 trillion yuan. Tencent's fund sales company ranked 9th at 220.6 billion yuan, while JD's Kentucky Fund Sales was 22nd with 100.3 billion yuan.
JD still has a long way to go in the fund business.
"JD Finance's fund sales have been underwhelming despite years of attempts," observed Jia Zhi, general manager of the asset management department at Hualin Securities. He believes that with platforms like Tiantian Fund and Ant demonstrating strong online sales capabilities, it's only natural for JD to intensify online fund sales.
Integrating the fund services into the primary JD app will undoubtedly attract more traffic compared to the standalone JD Finance app. This need for more user engagement was evident when influential media personalities and investors like Hu Xijin were invited to the JD Finance platform.
Jia Zhi contends that while JD's strength lies in its traffic, the established dominance of Tiantian and Ant demands newcomers to have a clear strategic roadmap and continuous resource investment to stand firm.
Others, from a Shenzhen-based fund company, believe that JD's unique data from its e-commerce operations provides a more detailed customer profile, giving JD a unique edge in KYC (Know Your Customer). With ample data and tech infrastructure, JD is well-equipped to support smart financial advisory and risk management services.
Compared to fintech giants like Ant Group and Lufax, JD Tech, ranking in China's fintech top three, still has significant growth potential in wealth management. It can bolster its credibility as a tech service provider with tangible performance in this sector.
Breaking Through
Liu has always been ambitious about financial services.
Admiring Walmart's founder Sam Walton, Liu once noted that 45% of Walmart's global net profit comes from reinvesting its cash flows. As early as 2014, he equated JD's budding financial sector with its online retail business, boldly predicting that most of JD's profits would come from its financial services in a decade.
He also once lamented that JD should have ventured into finance earlier, asserting that had they done so, JD's financial services would be much more substantial today.
Indeed, finance played a pivotal role in JD's growth trajectory. As early as 2013, JD began offering supply chain finance, solving financing challenges for many merchants, and establishing a mutually beneficial ecosystem. In 2017, Luo Yonghao thanked JD Finance at the Nut Pro 2 launch for its support to his company, Hammer Tech.
Later, JD ventured into consumer finance, launching "JD Baitiao", even before Ant's Huabei and Jiebei services. Internet finance became the talk of the town with giants like Alibaba, Tencent, Baidu, and JD jumping in. Especially the emergence of Ant Financial, a unicorn valued close to a trillion yuan, covering a wide array of services from small loans, wealth management, banking to insurance, turned many heads.
With the rise of the "FinTech" concept, many internet finance services underwent rebranding, wrapping themselves in tech while primarily being financial operations.
JD Technology's previous financial disclosures also showed that most of its revenue comes from JD Gold Bar and JD White Bar and other financial services. However, its services as a provider of industrial data solutions were only average in performance.
Yet this fintech enthusiasm came to an abrupt end against the backdrop of Ant Financial's halted IPO and the overhaul of the internet finance industry.
In 2020, Liu Qiangdong attempted to collaborate with China Merchants Bank to jointly establish an independent direct-sales bank called China Merchants Topology Bank. They received approval from the China Banking and Insurance Regulatory Commission for preparation. However, they announced the termination of the preparation work in July last year and failed to open for business. In contrast, Youhui Wanjia Bank, which applied almost simultaneously with them, commenced operations in June 2022.
Liu Qiangdong's dream of profiting directly from financial services was sadly shelved. JD Technology began emphasizing its tech attributes more; in March 2021, they integrated JD Group's cloud computing and artificial intelligence businesses at a cost of 15.7 billion RMB.
This January, JD Technology underwent an organizational restructuring, creating a new JD Cloud division and sales center, solutions center, and delivery center. Insiders close to JD stated that the structure of one division and three centers indicates that JD Technology is placing greater importance on its cloud services.
After his return at the end of last year, Liu Qiangdong carried out sweeping reforms on JD and proposed a 20-year "35711" vision plan. Splitting businesses for independent listings and financing has become a trend, including for JD Technology.
In the future, JD will adhere to the three major strategies of penetrating lower-tier markets, tech services, and international business. As the tech pillar of JD, JD Technology's strategic significance has been further confirmed.
JD Technology's aim is no longer to profit from traditional financial interest margins but to excel as a service provider, leveraging its cloud and AI capabilities to empower the finance and retail sectors.
The innovation in large-scale models and AI technology is just beginning to show its effects in enhancing efficiency and reducing risks in the finance industry. With its AI core, JD Technology will realize Liu Qiangdong's financial dream from another dimension.
This will be more meaningful than Liu Qiangdong's bold assumptions a decade ago, and it will also reshape the future landscape of finance.
