China’s financial fund products are no longer esoteric thanks to 17 Chinese fund companies who are gunning for the mass market by offering their fund products on Taobao Marketplace, a site that draws more than 100 million users daily.
The fund companies, which include top Chinese fund houses such as Guotai Asset Management Co. and Great Wall Fund Management Co., will allow Taobao Marketplace users to buy into money market funds, bond and stock funds as well as hybrid funds, Alibaba Group said in a press release on Friday.
On Thursday, Taobao Marketplace received a crucial no-objection letter from China’s securities regulator to allow for funds to be sold on its website, thus becoming the first Chinese Internet company to provide this service. Taobao Marketplace opened a vertical site called Licai, which means finance management in English, on its platform for users to find and buy into the products.
“We want ordinary people to understand that funds management is not something mysterious and the barrier to entry is not high,” said Yuan Leiming, an executive with Alibaba Small Micro Financial Services Group in the press release. “While users are buying their kitchen essentials like oil, salt, sugar and vinegar on Taobao, they can now also manage their finances.”
Fund companies are tapping into Taobao’s huge base of shoppers who are accustomed to the website’s standardized online buying process. This bypasses a crucial roadblock when buying funds offline as different companies have varied processes and protocols for the purchase of financial products.
Taobao Marketplace, a unit of Alibaba Group, is China’s largest consumer-to-consumer platform with an 80 percent market share. The site in recent years has expanded offerings beyond consumer products to insurance, movie tickets, travel and other services.
This year, Alibaba Group has pushed deeper into the financial-services sector through its e-payment affiliate Alipay and the Alibaba Small and Micro Financial Services Group. Late last month, it was announced that Alipay now manages China’s largest single money market fundthrough itsYu’E Bao service, that allows users to invest their idle Alipay cash to get a better interest rate than bank savings deposit rates.
To manage the risk of buying fund products online, Taobao Marketplace said purchasers will be prompted to take an online risk-assessment evaluation to help make them aware of the potential for losses. Those who skip the evaluation will be automatically categorized as conservative investors, restricting their purchases to lower-volatility funds. The site will also limit users to investments totaling no more than RMB 2000 ($328) in individual equity funds. There will be no limits on investments in commodity or debt market funds.
To invest in funds, consumers must register with Alipay using his or her real identity and be a Chinese citizen over the age of 18.
“For fund companies to set up shop on Taobao, it’s just a small step for the overall Internet finance industry,” said Yuan.
