Will the Sale of JD Finance Be Enough to Match Alibaba?

  • Grace Noto
  • March 2, 2017
  • 0

Chinese e-commerce company JD.com just made the next move in its on-going match with the Alibaba Group.

After reporting promising fourth-quarter results, including a 47% jump in revenue, JD.com also announced the sale of its finance arm JD Finance for about $2 billion (or 14.3 billion yuan).

JD Finance will spin off on its own, but the parent company will keep a share of the soon-to-be-independent division’s future profits—essentially, mimicking the way that Alibaba Group and Ant Financial have been quite successfully operating.

As the second largest e-commerce company in China after Alibaba, this move by JD.com could prove to have interesting effects on the industry.  Both of these groups were the leading fintech investors last year, according to data from Accenture; which also notes that fintech funding in the country outstripped funding in the West for the first time last year.

Like Ant Financial, setting up shop outside of the main company will allow JD Finance to have a little more freedom and range in the financial services it can offer.

However, Ant Financial has a bit of a head start, with the established popularity of its mobile payment product Alipay, and its status as the world’s second largest unicorn—the company has a valuation of $60 billion, below (a recently wobbly) ridesharing service Uber.

This advantage is especially clear in Chinese cities, where JD and Alibaba have been duking it out for years.

Ghela Boskovich, director of global strategic business development at Zafin, told Bank Innovation:

Let’s see what JD can do against Alibaba in rural markets. That will probably be the more likely market segment to try to grab, since urban e-commerce customers are unlikely to abandon what’s been exceptional service (from ubiquity of goods to payment options).

It has hints of what and Walmart have tried to do against Amazon. What keeps Amazon on top is actually not just the e-commerce product catalog, but the tech innovation: IOT devices, Dash button, and now Amazon Go (unconscious payments). If JD can mirror that sort of tech development, and outpace Alibaba’s offerings in that space, it could offer up a better fight than Jet & Walmart have so far.

JD.com’s shares are up 2% at the time of this reporting, to about $31 per share according to NASDAQ.

To learn more about Chinese fintech, join us in San Jose on March 6-7 for Bank Innovation 2017, where the best conversations in fintech take place. Click here to register.

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