Solid but slow-moving. This is how you might describe the business of global insurance. And that may be how China’s Ping An once was. Decades ago, it was an insurer selling life, property, and casualty insurance. Then it pivoted into banking and financial services.
Today, Ping An stands among the tech giants. Very rarely do incumbents double as technology disruptors. But Ping An launched a number of spin-offs, two of which have achieved unicorn status. It operates far beyond the boundaries of insurance and even finance itself. Taken as a whole, Ping An and its affiliates represent a new type of technology ecosystem. The most valuable insurance group worldwide, Ping An ranks 7th in the Forbes Global 2000 (a ranking of the world’s top 2,000 public companies).
Catching the wave
Peter Ma, the founder and Chairman of Ping An, observed the Internet economy had a ubiquitous quality to it. It affects the way people worked, lived, and played. Many CEOs, of course, would have arrived at a similar conclusion. But Ma followed up with his decision to invest aggressively in cloud computing. Jessica Tan, an MIT graduate, and former McKinsey partner, was tasked with moving all of Ping An’s IT systems to the cloud – and that happened more than 10 years ago.
“This was unthinkable at the time. … but we moved 80% of our production systems to the cloud nonetheless,” said Tan. “It took time and it was a very painful process.” Tan later became Executive Director and Executive Vice President. She was also one of the three Co-CEOs under Ma.
That turns out to have been a critical step. Building its own cloud allowed Ping An to develop advanced data analytics. It is the sort of technology foundation that links up all its businesses. Since then, Ping An has invested 1% of its revenue, or about 10% of its profit, in research and development every year.
The 11 technology affiliates that Ping An incubated span across five verticals. They include financial services, health care, automobiles, real estate, and smart city infrastructure.
Scaling up innovation and connecting with new partners
Innovation of this kind is typically expensive. Scaling up a new business requires major capital. OneConnect is an example. Once an in-house solution, OneConnect is now the world’s largest cloud-based platform in the financial sector. It provides end-to-end business solutions to banks – for example, facial recognition technology that verifies customers’ identities.
But a new business like OneConnect often fall behind profitability – and large companies measure success by financial performance – so the idea of OneConnect had not been universally accepted. It has consumed some $7 billion in technology investment since 2008. Big visions are expensive; OneConnect represented an intractable dilemma.
Ping An therefore routinely brings in outside investors in the early stages of its startups. In the case of OneConnect, it was SoftBank’s Vision Fund that injected $650 million into a Series A investment round in February 2018. This reduced capital constraints and lowered the investment risk in Ping An. It also put the valuation benchmark on the startups themselves. This, in turn, allows Ping An to be more patient for profits.
In 2019, OneConnect was listed on the New York Stock Exchange, giving the company a valuation of $7bil. As of 30 June 2020, OneConnect had served virtually all of China’s major banks. That includes 99% of the commercial banks and 53% of its insurance companies.
The Fast Move Faster
Ping An’s ecosystem also helped it gain an advantage during the COVID-19 pandemic. Its life insurance business has been hit significantly. But more than 30 banks have turned to OneConnect for digital service. Meanwhile, the registered users on Ping An Good Doctors have also surged.
“Many CEOs of publicly listed companies are governed by the quarterly earnings cycle. Very few are willing to invest unless immediate payback and near-term returns are guaranteed,” observed Tan. “They can start now. But they will need a long time to catch up. And by that time, we will be further ahead. We will continue to invest.”
If this sounds radical, it is. In the future, there will be no leading financial institute. What’s left are leading technology institutes that happen to work in finance.
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