New Business
“BIG DATA”
SUPPORTS
ALIBABA’S
YU’EBAO
One year has passed since Chinese
e-commerce giant Alibaba launched
Yu’ebao, which is thriving on the new
business model based on big data.
By Yi Yong Qing
Yu’ebao was the biggest “miracle” in
return of investment and remarkable ease
money market funds last year. Before the
of use are surely key factors, but effective
launch of Yu’ebao on June 13, 2013, its
risk control is equally important. A distinc-
partner, Tianhong Asset Management, was
tive feature of the financial industry is that a
ranked 54th among 72 money-market fund
financial enterprise must have strong risk-
companies in China. But as of Jan. 15,
control capabilities, or in a moment it may
2014, with the net asset value of Yu’ebao
lose everything it has gained over the previ-
rapidly growing to $40 billion, Tianhong
ous decades.
Asset Management miraculously became
In the past several months, Wu Xiaoling,
China’s largest fund, overtaking Huaxia
former vice president of the People's Bank
Fund, which had been ranked number one
of China, on several occasions mentioned
for seven consecutive years. According to
that Internet finance has two major risks:
industry estimates, Yu’ebao has a net asset
liquidity and mismatch of maturities.
value of over $80 billion and over 81 million
users.
In fact, traditional financial enterprises
have spent over a hundred years’ time
How can Yu’ebao succeed? A tempting
EMERGING MARKETS INSIGHT
32
avoiding these two risks by constantly opti-
SYNDICATION/CHINA
SYNDICATION/CHINA
ENTREPRENEUR
ENTREPRENEUR
An ad for Yu'ebao
which stresses
a high return on
investment.
New Business
mizing fund deployment. In 2008 when the
But with Alipay’s ten-year data accumula-
be matched one-to-one in theory,” said
U.S. financial crisis surfaced, American
tion, it’s less difficult to predict their behav-
Yuan Leiming. Based on the above strategy,
financial companies such as Bear Stearns,
ior, especially the trend of a majority of peo-
a sound secondary market can be devel-
Lehman Brothers, and American Inter-
ple at a certain stage.” Yu’ebao’s forecasted
oped, enabling financial institutions to have
national Group (52.49, 0.85, 1.65%) (AIG)
deviation of liquidity demand can be esti-
good liquidity and mobility in their assets.
all suffered high liquidity risks. Today, tradi-
mated even for time periods such as the
“If so, the entire financial market will
tional financial enterprises are transforming
Double 11 Festival and the Spring Festival,
become healthy and prosperous rather than
themselves from asset holders into asset
when investors frequently mobilize no more
panic about some unexpected events,”
managers. As banks’ short-term loans and
than 5% of their funds.
Yuan Leiming believes. “In the Internet
information era, there is an opportunity to
long-term assets have become a growing
trend, the mismatch in maturities has
“Big Data” to the Rescue
change, and financial institutions can shift
become an increasingly serious issue.
The mismatch in maturities can also be
from a B2C model to a C2B one,” Yuan
Yu’ebao also faces these same two risks.
solved through “big data.” Yu’ebao should
Leiming said. To achieve this transforma-
For example, as the funds invested in
be considered a C2B product. Although dif-
tion, the key lies in the “big data” capabili-
Yu’ebao are available for use at any time,
ferent users have different needs for liquidi-
ties of financial institutions. In the opinion of
massive withdrawals are likely to take place
ty, their needs can be integrated using “big
Ma Yun, chairman of the Board of Directors
on occasions such as the annual Double 11
data” to identify one-to-one matches in
of Alibaba (Scroll News), Alibaba will estab-
[online shopping] Festival, causing liquidity
assets in corresponding periods, thus solv-
lish three platforms, first an e-commerce
risks. On the other hand, if Yu’ebao has
ing the problem of mismatching maturi-
large levels of funds invested or invests too
ties.
much in long-term financial products, it
may lead to the mismatch in maturities.
So far, at least, Yu’ebao has done a good
job minimizing these two major risks while
rapidly expanding, and its weapon in doing
this has been “big data.” Yu’ebao has, above
all, developed well-targeted business rules
to address liquidity risks. It has stipulated
that individual investment amounts should
platform, then a financial
platform, and finally a
“big data” platform.
“When the user base and the
H o w e v e r, a
database is large
enough, any
needs can
A “big data” platform cannot
be developed using the original
technical infrastructure; instead,
a cloud platform is needed.
not exceed $160,000. At present, Yu’ebao’s
average individual investment amount is
only $640.
By contrast, as a considerable proportion
of traditional fund investors have been corporate investors, traditional funds have an
average individual investment amount far
exceeding that for Yu’ebao. Similarly, the
number of investors is far less than that for
Yu’ebao. With over 100 million investors,
“big data” can fully exert its power.
The liquidity management of Yu’ebao
uses the “big data” amassed by Alipay over
the nearly 10 past years. Yuan Leiming,
general manager of the Financial Services
Division of Ali Small & Micro-Finance Group,
said, “It’s very difficult to understand and
predict the behavior of individual investors.
EMERGING MARKETS INSIGHT
33
New Business
“big data” platform cannot be developed
IOE solution. After the launch of Yu’ebao,
using the original technical infrastructure;
however, Tianhong quickly moved to
instead, a cloud platform is needed. Alibaba
Alibaba’s cloud platform to support its big
Group’s CTO Wang Jian thinks that, though
data applications. A de-IOE data sovereign-
traditional fund companies grow linearly,
ty movement initiated by Alibaba is in full
Yu’ebao is growing very fast. To build a “big
swing. In May 2013, Alibaba Group
data” platform, it must get rid of the exist-
removed the last IBM minicomputer from
ing technical architecture.
Alipay. On July 10, the Oracle database
used by Taobao advertising system was
Up in the Cloud
eliminated. Alibaba will soon complete an
Traditional fund companies often use the
overall transfer of two of its major systems.
IT infrastructure of traditional American IT
Apart from helping Alibaba support
giants IOE (IBM (190.22, -1.51, -0.79%),
Yu’ebao and Tianhong Asset Management,
Oracle and EMC (25.51, -0.40, -1.54%)),
big data can also bring more value to
which are relatively closed and strongly
Alibaba. For data quality, the transaction
coupled, to support the extraordinary
data gathered by Alibaba is undoubtedly
ROI of Yu’ebao
0
ROI (%)
6.8
6.2
5.7
5.2
Jan 8
4.6
Dec 6
Jun 5
growth of Yu’ebao and its application of big
the closest to being cashed in, or the more
data. As these IT infrastructures lack scal-
likely of the two to be commercialized.
As a search company, Baidu (159.74,
ability, however, these issues fundamentally
Moreover, most of the several hundred mil-
0.40, 0.25%) has the largest amount of
cannot be solved. In response, Alibaba is
lion users of Alipay have registered their
data and the most powerful pure big data
committed to creating a cloud cluster. The
real names and bank card information, a
capabilities. But Baidu lacks a strong
related Flying Program had a single cluster
large amount of which is transaction data.
account system, sufficient transaction data
of 5,000 servers as of Aug. 15, 2013.
have their shortcomings.
Of course, apart from Alibaba, two addi-
and a foundation for creating a cloud plat-
Prior to the launch of Yu’ebao, Tianhong
tional giants, Baidu and Tencent, are also
form to implement big data analysis.
Asset Management had also adopted an
adding big data resources, though they
Previously, Baidu had initiated a big datarelated “scheme,” but this didn’t seem to
pan out. Insiders disclosed that this was
because Baidu did not fully anticipate the
long-term cost and investment required for
cloud computing. In 2010, Baidu launched
the search-based big data program
“Typhoon,” but was close to giving up on it
by the end of 2012. Then Yang Zhenkun,
the head of the program, quit, joining
Alibaba.
Tencent (534, 1.50, 0.28%, Real-time
News) also excels at big data and has
China’s soundest QQ and WeChat account
systems. Unfortunately, it is not deeply
involved in the business chain. Tencent has
been planning to launch the “WeChat
Store,” a WeChat-based e-commerce product, but its launch has been repeatedly
delayed.
Even for Internet companies excelling at
data, big data is a temptingly large cake.
But bites from this cake seemingly take a
great deal of effort to swallow.
EMERGING MARKETS INSIGHT
34