Community Blog The Next Big Technology after Digital Wallets (Part 3)

The Next Big Technology after Digital Wallets (Part 3)

China digital wallets don't just bring you the Chinese tourists, but also the intelligent risk management technologies that safeguard the digital economy.

By Albert Lau, Financial Services Innovation Principal, Alibaba Cloud

The trade war between China and US are in negotiation. There are many different perspectives how this rivalry may be reshaping the global technology landscape. Factors from economics to geo-politics and from science to next-generation workforce all come into play.

Instead of picking sides in this rivalry, we attempt to answer a more fundamental question – how Chinese technologies are actually impacting the world? Very little is actually known about China, except that "Baidu we understand is Google, Alibaba and Tencent are the two giants and Didi is like Uber" [1]. There is probably a reason for the lack of their publicity outside China, as IE Business School Michael C. Wenderoth noted, that there is so much room to grow in China and many innovative Chinese don't need to look for international markets [2].

Digital Wallets around the Globe

Apply Pay comes to mind when the world talks about digital wallet. There are around 33 countries accepting Apply Pay at the authoring of this article (Feb 2019). 42 countries accept Alipay, and 38 of them countries and regions accept both Alipay and WeChat Pay.

Source: Tech in Asia

It is true that the Chinese tourist has been one major driving force. For example, at Finland, Alipay is so widely accepted among Finnish merchants that Chinese visitors can have their trips completely cashless with Alipay, from making local retail purchases in Helsinki, and dining out, to visiting museums, managing transportation, and even receiving an instant tax refund at the airport [4].

There are, however, much more than Chinese tourists - Kakao Pay of Korea would leverage the experience of Ant Financial in over-counter payments, peer-to-peer transactions, bill payment and more [5]; strategic partnerships with Mynt and its GCash and Fuse at Philipines, bKash of Bangladesh, and so on [6]. Most of such strategic partnerships are founded on the mature experience and technology China already instilled through its extensive applications, and advancements through competition, that few if any other countries may be able to offer. Interested readers may refer to [7] which discusses the innovation boom at China.

Why Intelligent Risk Management?

In PwC's 2018 China Fintech Survey [8], it is predicting that smart risk management based on big data is going to be the next big technology that would lead in the global arena, agreed by 58% of respondents, followed by 41% on Internet insurance.

Indeed, intelligent risk management accounts for the most investments among the fintechs specializing in AI applications in 2018, accounting for 34.7%, followed by 25.7% in intelligent investment advisory [9]. Unsurpisingly, at Aug 2018, Tongdun Technology became one of the 27 finalists in the "Global Fintech Unicorns" list and was the only intelligent risk management company in the list [10].

By intelligent risk management, the focus is on ingesting intelligence into the credit risk management processes through mining the customer big data, and the application of them across the entire credit lifecycle from customer acquisition, and loan application and approval, to post-disbursement monitoring and collections strategy.


The advancement of the intelligent risk management technologies follows the popularity of the digital wallet, digital commerce and digital finance activities. Without such technologies, it is imaginably difficult for any payments and loans activities to happen with acceptable business performance for more to boom and happen at scale. In addition to the credit risks, fraud also accompanies as a source of concerns. China has also mastered the anti-fraud approaches and technologies along the journey to enable the continued evolution of China's digital economy.

The digital state of China has given birth to these demand, and the scale of the China market has fueled the development and maturity of such investment.

Distinguished Aspects of Intelligent Risk Management

There are 4 distinguished aspects that this intelligent risk management is founded on that make it different from the traditional approaches.

  1. Digital footprint, or big data – There is no secret that all digital activities with your smartphones leave traces of personal data with your service providers, be it with Google Map, Facebook Messenger, Amazon Go, etc. The same is true at China, only that there're a lot more data as smartphone can truly replace your wallet in your daily life at China. Privacy would naturally be a concern. However, there are valid counter-arguments that suggest China's use of big data might actually be less "Big Brother-ish".[11].
  2. Relationship networks – Most financial institutions take a threshold-based approach in its credit and risk management activities. For example, if you're transferring $1,000 dollars to a third party, it will likely not be subject to any scrutiny and thus unnoticed in the grand scheme of risk framework. On the other hand, a transfer of $100,000 would subject you to scrutiny and may even require manual approval and thus lag time in effecting your transaction. This approach is very logical in the old days, when the transaction amount may be one of the most important data point that is risk-tied. This is ineffective in the digital age, when rallying 100 people to transfer $1,000 each isn't that difficult at all. Harnessing this form of entity relationships through advanced graphical analysis become critical. Recently, multiple U.S. regulatory agencies encouraged lenders to try out new technology and intelligence-gathering methods as they combat evolving illicit-finance threats.


  3. Granularity and adaptiveness – The digital approach (vs manually by the bank operations team) also allows more segmented approach to handle the populations of customers differently. The intelligent risk control systems can for example handle thousands of segments and conditions at ease (if this is indeed required and backed by your analytics), whereas this would drag any troops of the compliance operations at the largest banks to be ineffective. Furthermore, such anti-fraud and risk management approaches can be adjusted at ease across the different channel systems and touchpoints, without the worries of complicated hardcoding that has been a common practice in the old technology days.
  4. Real-time – This requirement is obvious, as any frictions in a digital customer interaction would result in an unhappy customer and likely hurt the adoption and popularity of the services. If each additional second of page load time can inadvertently get your potential customers elsewhere [13], we should think about the case of a customer standing in front of a cashier to complete a transaction. If I'm paying a $5,000 Rolex watch during a leisure trip at Switzerland, and being prompted additional anti-fraud measures, I probably can appreciate. If I go on to pay for a $1,000 hotel bill and being prompted for the same again, I'd wonder if I should take a different payment method. Whilst a credit card transaction of your hotel bill may come only a few days after you're back home, this is clearly intolerable with digital payments and the associated anti-fraud technologies at China.

Intelligent Risk Management at Alibaba's MYbank

We have introduced MYbank's 310 model at [7], and highlighted its superior business performance, with non-performing loan ratio (NPL) at around 1% only. This is in fact better than the traditional players who are chasing the more attractive segments of customers.


Readers should now better appreciate the complexities in setting up the risk frameworks and models to support the different customer segments, and across the end-to-end lifecycle. This does not only exemplify the business value of big data, but also illustrates how mature technology can drive digital business model innovation.

It is notable though these are results of a multi-year efforts, e.g. experimenting with the risk models, implementing the graphical analytics tool, enhancing the decision engine to orchestrate the touchpoints, etc. Alibaba Group's mission is to make it easy to do business anywhere. In the same vein, Alibaba Cloud is making it easy for businesses to transform and thrive in the digital economy with the proven technologies of Alibaba.

Do All These Matter?

We would soon be able to see whether all these innovations would indeed be the next big technology. Before then, here are a few departing thoughts.

  • More than risk management – While the technology has grown out of the need to manage the digital finance risks, technologies such as decision engine and the graphical analysis tool are extensible for many other purposes. How would they innovate your digital business model?
  • Foundation – If this indeed becomes important in your business, how would you get your business and IT landscape prepared?
  • What I still don't know – None of us would be able to catch up with all the latest technology advancement around the world, even in a narrowly defined domain. Whilst we may spend time to research for the best, we may as well take the action to experiment with the good-enough and build upon the successes thus garnered.

The digital economy at China have continued to amaze me with mature business technologies given its scale and growth prospects which attract all forms of investments. These don't solve all the world's problems though. As technology strategist, I would continue to look for inspirations from around the world.


  1. The Telegraph, "China's tech giants have conquered the East, now for the West", https://www.telegraph.co.uk/technology/2018/09/23/chinas-tech-giants-have-conquered-east-now-west/
  2. Forbes, "China Is Innovating Faster Than You Imagine", https://www.forbes.com/sites/michaelcwenderoth/2018/04/11/china-is-innovating-faster-than-you-imagine/
  3. Tech in Asia, "A surprising number of countries now accept WeChat Pay or Alipay", https://www.techinasia.com/surprising-number-countries-accept-wechat-pay-alipay
  4. Finextra, "Finland opens up to Alipay", https://www.finextra.com/pressarticle/72458/finland-opens-up-to-alipay
  5. TechCrunch, "Alibaba's Ant Financial expands to Korea with $200M investment in Kakao Pay", https://techcrunch.com/2017/02/20/ant-financial-kakao-pay/
  6. Ant Financial Press Releases, https://www.antfin.com/news.htm
  7. Alibaba Cloud, "Financial Services Innovation Boom in China", https://www.alibabacloud.com/blog/financial-services-innovation-boom-in-china-part-1_594442
  8. PwC China (普华永道中国), "2018年中国金融科技调查报告", https://www.pwccn.com/zh/services/consulting/publications/2018-china-fintech-survey.html
  9. iResearch, "2018年中国人工智能+金融行业研究报告", http://www.iresearch.com.cn/Detail/report?id=3295&isfree=0
  10. Markets Insider, "Tongdun Technology Added to CB Insights' Global Fintech Unicorns List", https://markets.businessinsider.com/news/stocks/tongdun-technology-added-to-cb-insights-global-fintech-unicorns-list-1027435717
  11. MIT Technology Review, "China's use of big data might actually make it less Big Brother-ish", https://www.technologyreview.com/s/611814/chinas-use-of-big-data-might-actually-make-it-less-big-brother-ish/
  12. WSJ, "U.S. Encourages Banks to Innovate in Anti-Money Laundering Compliance", https://www.wsj.com/articles/u-s-encourages-banks-to-innovate-in-anti-money-laundering-compliance-1543878973
  13. Fast Company, "How One Second Could Cost Amazon $1.6 Billion in Sales", https://www.fastcompany.com/1825005/how-one-second-could-cost-amazon-16-billion-sales
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