Hong Kong fintech unicorn WeLab raises US$75 million led by Allianz
As the COVID-19 pandemic accelerated the booming of “contactless” digital services, domestic and overseas capital markets are being drawn to opportunities in the fintech sector. WeLab is one of the beneficiaries.
On March 8, 2021, WeLab, a leading fintech company in Asia announced it has completed the initial close of series C-1 funding, led by Allianz X for US$75 million. Allianz X is the digital investment unit of the Germany-based Allianz Group, one of the world’s largest insurers and asset managers.
As the market is rapidly evolving, the tremendous growth potential brought by accelerated digital adoption is driving fierce competition among both challengers and incumbent players across financial services sector.
It is widely recognized within the industry that fintech companies that are equipped with regulatory and licensing qualifications, advanced technology capabilities and innovation track record, and are more likely to thrive and attract stronger interests from investors.
Capturing the window of opportunity amidst the accelerated digital adoption
According to the recent Caixin 01 Think Tank report “Global FinTech Financing Snapshot”, Fintech investment has been picking up since the beginning of 2021. In February, there were 191 fintech equity deals globally, with YoY growth of 189.4%. The total volume is estimated at RMB 21.7 billion, with YoY growth of 77.1%. In China specifically, there are 16 deals completed, with YoY growth of 60%; while the volume has reached over RMB 1.5 billion, with YoY growth of 192.5%.
WeLab is a perfect case in point of this renewed financing trend, bagging US$ 75 million from Allianz X. It is worth noting that this is not only a financial investment – Allianz and WeLab have also established a strategic partnership with plans to develop and distribute digital investment and insurance solutions.
The COVID-19 pandemic has changed the way people live, while end-to-end online services have become the new norm across different sectors. Accelerating digitization is also a key topic in China’s “Government Work Report” announced on March 5. The report stresses that digital industrialization and digital transformation are crucial for the development of a digitized society, and the creation of a fully digital ecosystem in China.
Mr. Chen Wen, the head of digital economy research center at School of Finance in Southwestern University of Finance and Economics commented that investors’ increasing interest in fintech companies is a strong indication of the rapidly evolving digital economy.
WeLab’s Founder and Group CEO Simon Loong also shared that even though the pandemic has caused many uncertainties, what investors like Allianz do feel certain about is WeLab’s growth potential and tremendous opportunities in the fintech industry. As the two companies ahre the same vision of delivering advanced technology solutions in Asia, WeLab and Allianz overcame challenges of having to work virtually across 7-hour time difference between China and Germany. The deal complements Allianz’s expansion strategy with technology-focused partners in the region.
Simon Loong, Founder and Group CEO of WeLab
The two companies reportedly aim to combine WeLab’s advanced digital banking technology capabilities and market know-how with Allianz’s expertise in insurance and asset management. By partnering up, both companies can holistically improve people’s financial wellbeing and tap into the growing digital opportunity in the region. The broader strategic cooperation between WeLab and Allianz will continue to develop over time and encompasses two key areas: 1. Rolling out pioneering digital wealth management through WeLab’s digital bank; 2. developing and distributing investment and insurance solutions in new markets.
WeLab Bank and Allianz Global Investors (AllianzGI) intend to enter into a strategic cooperation in digital wealth management and financial services. The smart and digital wealth management solution will bridge the significant unmet investment needs in Asia. Simon Loong referred to this collaboration between WeLab and Allianz as a “4-way partnership”, where there are abundant synergies between WeLab, as a fintech leader and a pioneer in digital banking, and Allianz, as a global insurer and asset manager.
According to the BlackRock 2019 Pulse survey, only 27% of the Asian population use financial advisors, resulting in a sizable under-advised population of over 3.4 billion. Once the digital wealth management solution is rolled out, WeLab Bank will be the first digital bank to deploy this wealthtech advisory technology in Asia. Simon Loong added that the services will be first offered to new digital customers in Hong Kong and later to the Guangdong-Hong Kong-Macau Greater Bay Area (GBA), through Wealth Management Connect, reaching the 72 million population.
Simon Loong believes there is a lot of potential to expand the cooperation and offer accessible digital financial services in Southeast Asian market. In terms of exploring new market opportunities, the two companies are exploring opportunities to offer new digital investment and insurance products in the region combining Allianz’s expertise in investment and insurance and WeLab’s network of customers and technology. According to data from the World Bank, in the booming digital Southeast Asian economies, there are around 400 million active internet users, but over 70% of the total population is either unbanked or underbanked.
Looking back in 2020, Simon Loong recalled moments of challenges and opportunities. The pandemic has transformed people’s money habits across their financial journey. After navigating through the initial uncertainties, WeLab emerged stronger from the pandemic with multiple businesses achieving significant milestones in the past year.
At a time where traditional branch operating hours and business model were severely hampered, WeLend, WeLab’s pure online lending platform in Hong Kong, outperformed the market by 70% in 2020 to achieve its all-time record high sales volume; Tianmian Technology, WeLab’s B2B enterprise solution platform, doubled the number of business partners and increased annual revenue by 20%; Maucash. WeLab’s mobile lending platform venture in Indonesia, achieved over 6x YoY volume growth, with increased brand recognition and popularity of online financial services.
“We also launched a digital-only bank, WeLab Bank in July 2020, during the third wave of pandemic in Hong Kong.” Simon Loong shared that at the time there are many voices of skepticism about launching a new bank in the middle of a pandemic. However, in Simon Loong’s view, launching during the pandemic is exactly the right timing, as customers are more than ever in need of remote account opening and more accessible, better digital financial services. Simon Loong’s vision has proved to be true. Since launch, WeLab Bank has garnered strong traction with its innovative products such as numberless WeLab Debit Card and term deposit with social elements, GoSave. Fueled by increased digital adoption in online financial services, WeLab’s user base grew by 20% YoY, adding around 10 million users to the current 50 million user base.
Standing out from fierce competition
The opportunities in fintech market are attracting intense competition from all sides, from big tech companies as well as incumbent financial institutions in various forms such as partnerships and spin-offs. How does one stand out and differentiate from such a fierce competition? A professional from a state-owned banking institution shared that in a stringent regulatory environment, only fintech companies with regulatory and licensing qualification can survive in the long term; secondly they need to have outstanding research and application capabilities of technology innovation; thirdly they need nimble and advanced management style and strong talents.
Since the People's Bank of China (PBoC) released the FinTech Development Plan (2019-2021), the roadmap for fintech development has become clearer and the regulatory framework has matured over the years.
Mr. Ren Zeping, a renowned economist analyzed that 2020 is a pivotal point for fintech development – the theme of the previous decade had been the rise of tech giants and rapid disruptions of innovative business models, while in the new decade the focus will be shifted to strong growth in a more clearly defined framework.
“The regulatory scrutiny over the last few years is not intended to kill off the innovative fintech ecosystem, but to trim off reckless practices and provide fintech and traditional players with a clearer path to growth.” research analyst Jin Tian from Beijing Kandong Research Institute of Economics pointed out, in today’s operating environment, leading institutions that operate under stable licensing schemes will stand out the most to investors.
In fact, since founded in 2013, WeLab raised more than US$600 million (RMB 4.2 billion) of strategic financing from the world’s most renowned investors.
Industry insiders believe that WeLab’s track record in fundraising is inseparable from the outstanding risk management and technology innovation capabilities that are embedded in their corporate DNA. It is reported that 80% of WeLab’s senior management team are veterans from top traditional financial institutions, most of whom had held senior positions in risk management before joining WeLab. Even during the early explosive growth of fintech industry in China, WeLab persisted its focus in risk management and adaptive operating model and successfully maintained strong growth throughout the year.
WeLab’s unique geographical positioning and the two pronged business model of penetrating B2C and B2B markets are also considered as their competitive advantage. WeLab has laid out its B2B strategy early in its journey and landed its first fintech white-labeling project with a top state-owned bank in China back in 2015.
At the same time, WeLab is also leading in the digital banking battleground, which is one of WeLab’s greatest growth areas. Digital banking is an inevitable trend that is redefining how people bank and across Asia are in the process of studying or implementing digital banking frameworks. Simon Loong pointed out that WeLab is ahead of the curve. WeLab has received its license in 2019 and has been spearheading the new age of banking by operating WeLab Bank in Hong Kong — one of the first fully-licensed digital banks in Asia. Potential partners in Southeast Asia have also approached WeLab to explore developing digital banking in the new markets.
When recalling fundraising experience over the years, Simon Loong shared that WeLab became profitable quite early on and has already become a self-sustaining business. However, each round of fundraising enabled WeLab to quickly capture new market opportunities and bolster its growth strategy.
“Take this round of fundraising as an example, Allianz and WeLab are forming a strategic partnership on top of the investment. We will be combining our resources and expertise to drive geographical and business expansion together.” Simon Loong said.
Commenting on Allianz X’s investment on WeLab, Nazim Cetin, CEO of Allianz X, said, “In a relatively short amount of time, WeLab has built up a powerful platform for digital financial services and achieved excellent access to retail and business customers in Asia, a region of strategic importance for Allianz. WeLab’s high-performance technology platform, in particular, makes it a unique fintech in the Asian markets. The investment in WeLab is a promising one for Allianz both economically and strategically. We look forward to leveraging our strategic partnership with WeLab and the business potential in the region.” As a Hong Kong based homegrown fintech company, WeLab has built solid foundation to embrace the Greater Bay Area opportunities as well as planting expansion strategy in new markets in Southeast Asia.
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