Pintec Technology Holdings Limited may not be a household name in the U.S., but it ended last week with a some very strong results on the American stock exchange. The firm, which provides an open platform that makes it possible for financial institutions (FIs) and businesses to access a variety of financial services, raised $44 million in an initial public offering (IPO) on the Nasdaq Stock Market in New York Thursday (Oct. 25).
The firm has seen rapid growth in the run up to its IPO — its revenue has grown around tenfold year on year from 54.9 million yuan ($8.02 million) in 2016 to 568.7 million yuan last year.
The Chinese mainland market is a tough place to operate. There are, of course, many potential partners with which to work. However, the field is competitive, particularly in financial services, Pintec CEO William Wei told Karen Webster during this week’s Monday Conversation. Fresh off finishing the IPO, Wei noted — joined by the company’s President Zhou Jing — that the firm’s rapid growth, and now successful IPO, is mostly because it is approaching a big market with something of a unique offering.
Pintec allows banks, non-bank FIs and businesses to turn on a host of services that, in essence, allow them to custom build their own consumer ecosystems. Some of the many specific solutions it provides is point-of-sale (POS) lending, wealth management, personal installment lending, small and medium-sized business (SMB) lending, insurance products and payments solutions.
“Mainland China is a very active market, but we are really looking at our offering as purely a solution product that is designed around enabling our financial institutions and businesses. There are not a lot of competitors there, and we can also provide for very specific requirements,” Wei said.
Jing agreed, noting that in a market as large as China, there is a variety of specific needs. Pintec’s purpose has been to create an open platform not constrained to or by any particular ecosystem so as to provide an offering that can “cater to more situations” and a wider array of use cases.
The executives both noted that, now that the IPO is complete, they are looking to how the company’s Solution-as-a-Service platform can be exported beyond China’s borders.
Flexibility-as-a-Service
Pintec offers a variety of solutions, and among its partner set (which, as of 2018, includes 179 business partners and 81 financial partners), the services they use vary widely. Wealth management, Wei noted, is a popular favorite across the board. From there, the types of services its partners pursue vary, depending on their business and desired consumer group.
“In theory,” Wei said, “a firm with the right team, and enough time and money, can build a good solution in any of these areas. If you look at, for example, a second- or third-tier bank, however, they aren’t going to have all of that time and money to experience. We can see they are weaker in these areas, and they aren’t living up to user expectations in the way that, say, internet-based companies are.”
It’s not realistic for these firms to build these capacities out one by one. It is realistic, however, for Pintec to build solutions for all these problems, then offer them up via white-labeled products.
On the front end, the bank or business gets to offer its customer the set of services most appropriate to acquire and keep them. On the back end, Pintec leverages its artificial intelligence (AI) and deep learning technology against risk management, underwriting and other back-end challenges associated with the services.
“We don’t rely on a single data source or a single segment of demographic areas. We set up the data infrastructure to mine data from lots of sources, and then, using AI-powered machine learning [methods], we can automate a lot of effective risk management. The result is we are able to cover a wider range of customer bases than traditional financial institutions,” Jing said.
That data mining, she noted, is not done in secret. It is done with owner permission, usually so they can go through a loan application.
Chinese consumers, Wei and Jing noted, have changed dramatically over the last 20 years — an increasing number have bank accounts and are well wired into digital payment schemes like Alipay and WeChat Pay. Those mega-FinTech firms, they added, are becoming such a massive competitive threat when it comes to consumers that banks and other businesses are increasingly in need of better ways to tap into the new consumers created by exposure to these services.
The Business Of Building Ecosystems
From a certain perspective, Wei noted, Ant Financial and Pintec are in the same business in that they are both ecosystem builders. However, that description isn’t all that helpful because they operate in very different spaces.
Ant, he noted, is built off the epoch-making success of the Alibaba business; it uses that incredibly powerful platform as its jumping-off point “to make new things happen.” Pintec doesn’t have that, which means when the company thinks about how to make new things happen, it has to think “a little differently.”
“Our partners, who are using our technology and solutions, are more flexible and want to be able to do things to their own system requirements,” said Wei.
When one works in the Ant ecosystem, he noted, it is just that: someone else’s ecosystem with someone else’s system requirements.
“We’re not competing with Ant,” Jing said. “It’s a big marketplace, and different firms have different needs, and we are catering to them from a different perspective.”
From its own perspective, Pintec can help its banking and business partners create sticker relationships within their own ecosystems — so that a customer with an Alipay or WeChat Pay account, or a relationship with any number of digital providers, might have a reason to keep doing their business with banks in some regards. They might, for example, pay with Alipay, but get their lending products from their smaller regional banks.
The goal with the IPO behind and revenue growing consistently, the executives said, is to think about how to expand. That will be both in terms of services offered in China and with its first expansion beyond China’s borders. Singapore will be its first move outside of China, according to Wei.
“We want to continue to enable ecosystems to develop, and to make it possible [for them to be] as customized as our partners want them to be, and really need them to be in the future,” Wei said.
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