Yu\u2019E Bao, \u201cLeftover balance\u201d in Mandarin, is a Chinese money market fund launched in June 2013 by Alipay, an independent subsidiary of Alibaba. Alipay, a payment platform similar to PayPal, has thus become a one-stop-shop for all personal financial needs.<\/p>\n
More than an investment tool for \u201clazy people\u201d<\/strong><\/p>\n The one yuan minimum deposit (16 USD cents) represents the biggest wow and the true disruption to the Chinese financial market. One yuan! That\u2019s roughly 50,000 times less than the traditional investment banking threshold in China. Alipay just created a financial product for a new rising segment of Chinese tech-savvy middle class, a segment that has been long overlooked by the banking majors for high individual costs and low expected profits. A banking product for the unbanked.<\/p>\n Yu\u2019E Bao is a true no-frills investment tool. It sits directly in the Alipay mobile wallet app. The interest income is just one-click away. You receive a payment for your products. Your friend sends you money for splitting the cab using Alipay. No need to transfer the money to a bank, to go to the nearest branch, to talk to a financial adviser and to choose a financial investment product. No need to spend the time and to pay fees. Just click and start earning money. It is accessible 24\/7. As simple as it can be. Not convinced? The first interest rate was more than 150% higher than the one provided by the incumbent banks.<\/p>\n Alipay turned e-commerce users into individual investors and made saving for purchases on its platform a sweet deal. You can place deposits on the phone and gain interest on Yu\u2019E Bao while waiting for the sale to be completed on Alibaba.\u00a0How is it possible?<\/p>\n Profit-making machine: spread and e-commerce platform loyalty<\/strong><\/p>\n Digital world enabled Alipay to stay profitable while leveraging the substantial collective amount of individual meagre savings. Yu\u2019E Bao was managing $93 billion dollars from 185 million users by the end of 2014.<\/p>\n Alipay was able to launch a low-cost financial platform and sell the product to its existing user base. The operating costs were squeezed to minimum compared to the traditional brick & mortar financial institutions. The technological money-transfer platform already existed. There was no need to employ financial intermediaries. Alipay had already direct access to the Chinese inter-bank market, which represented a highly profitable field during the first year after the product launch. Moreover, the Alipay platform is used by ~300 million consumers. Conversion cost is always below the high marketing acquisition cost of new users.<\/p>\n Yu\u2019E Bao proves to be another piece strengthening the Alibaba e-commerce ecosystem. It ties the users\u2019 disposable income to the Alibaba platform and promotes online transactions. Moreover, it increases customer satisfaction and loyalty by giving them financial benefits. The \u201cearn interest while you save for a smartphone purchase\u201d campaign locks the customers in the e-commerce platform and provides a \u201cperceived discount\u201d to the users. Besides, Alibaba gains a valuable big data insights by tracking and comparing buying and investing consumer patterns.<\/p>\n Sustainable and scalable model<\/strong><\/p>\n Many critics stressed that Yu\u2019E Bao was just gaming the Chinese non-free-market interest rate regime by engaging in financial arbitrage. The initial fund growth boom is over, true. However, Yu\u2019E Bao interest rates are down 50% and the product is still popular. Moreover, an Alibaba finance affiliate unveiled an integrated wealth management app, Ant Fortune, this August. After having tapped into the financial market, Alibaba is ready to scale up with a tool offering 900 mutual fund products from 80 Chinese financial institutions. The originally e-commerce digital product is aspiring to scale up to a full-fledge financial product provider and go well beyond the Chinese borders.<\/p>\n","protected":false},"excerpt":{"rendered":" The mighty Alibaba ecosystem managed to scale up internet finance while driving core e-commerce growth.<\/p>\n","protected":false},"author":94,"featured_media":278,"comment_status":"open","ping_status":"closed","template":"","categories":[83],"class_list":["post-277","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry","category-digitalwinner-yuebao"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-digit\/assignment\/digital-winners-and-losers\/","yoast_head":"\n