BIG TECH: Chinese Uber rival DiDi launches financial services to get profitable.

You likely heard that Apple is getting beat up. The two main reasons are (1) the trade war with China, a market in which it both sells phones and makes phones, and (2) consumer boredom with its products, which are seeing a slower upgrade cycle than previously. But at least we know what the company does -- makes hardware/software bundles, and sells them to us. In the parallel reality that is China, Huawei is trying to regain face after having its CFO captured, while Tencent and NetEase are not being allowed by the government to sell new video games because these games are too addictive for young people (not kidding). No existential dread over privacy (since it's the Party and not Facebook that does the spying, and election tampering is ... less important), but lots of dread over global competition and national pride.

This next bit is quite weird though. We know that financial services are bundled into all the tech companies in China -- whether into video games, online shopping, or search engines. But even more than that, financial services are seen as the seasoning that helps make your unprofitable venture-backed firm profitable. The Chinese version of Uber, called DiDi Chuxing with 550 million users, is burning about $1 billion per year. The solution? Launch insurance for critical illnesses, crowdfunding products, credit, lending, and wealth management services bundled into your taxi-hailing app. Huh? While the app certainly owns a nice consumer pipe, the idea that you can sell over-priced financial products at scale in your taxi experience to make up for poor operations is bonkers.

Who would even buy insurance from their Uber app? Quite a few people in China, actually. Unlike the West, where finance is Old Hat, Boring, and Terrible -- the unbanked narrative is much stronger in the East. As a great data point, let's revisit our recent Digital Lending analysis, that showed thousands of P2P digital lenders rushing across China to generate credit and liquidity. But reality was far from vision, with most of these enterprises revealed as Ponzi schemes and scams. The government's crackdown on the space could result in 70% closures of the industry this year, with Yingcan Group predicting that only 300 companies will remain. Doesn't look too profitable to us.

8409bf0d-1947-464f-8951-9c63326f1573[1].png
d2fa843a-0953-4913-ad87-bbdfaebfd5f7[1].png

Source: Slate (Apple), SCMP (AppleHuaweiTencentDidiDigital Lending), Autonomous NEXT (Digital Lending Evolution)