Ping An Insurance

Chinese insurers eye opportunities in online payment services

Insurers' plans for third-party payment systems are running into e-commerce giants' ambitions

PUBLISHED : Thursday, 27 February, 2014, 11:05am
UPDATED : Friday, 28 February, 2014, 8:17am

Payment platforms have emerged as a new battlefield for Chinese insurers, who see internet finance as being increasingly lucrative, but their ambitions could be hindered by concerns over cost and competition from e-commerce giants, analysts said.

With China's e-commerce industry growing by leaps and bounds, insurers could diversify their sales channels through providing third-party payment services, said Wang Guojun, an insurance professor at the University of International Business and Economics in Beijing.

Ping An Insurance, the mainland's second-largest insurer, entered the third-party payment business last month by acquiring a local company with the necessary licence, becoming the first Chinese insurer to join the fray.

Ping An launched its mobile payment and social networking platform, named Yiwallet, earlier in the month.

Taikang Life Insurance started selling insurance online last year, teaming up with Taobao, the online mall of e-commerce giant Alibaba, which controls third-party payment arm Alipay.

Non-life insurers, such as PICC Property & Casualty and China Pacific Property Insurance, are also selling policies on Taobao.

Some big mainland insurers might follow Ping An into the third-party payment business, although Wang did not expect a large number to do so.

"Ping An aims to develop an integrated financial service platform," he said.

"Providing third-party payment services will not only benefit its online insurance sales but also its other internet financial business."

Wang said insurers could also consider working with existing payment companies, as the costs would be lower than running a third-party payment platform on their own.

Ping An's third-party payment services would be key to linking up various businesses, including insurance, banking, trust and securities, a spokesman said.

Wealth management and insurance were already offered under the company's internet finance plan, supported by the payment services, which would likely be expanded into purchases of basic necessities, he said.

However, the fierce competition in the third-party payment sector could deter Chinese insurers, Wang said. He said co-operation with Alipay or Tenpay - the payment arm of internet giant Tencent - would be good enough and more cost-effective.

According to the People's Bank of China, 250 third-party payment licences have been issued since 2011. Last year, mobile payment transactions on the mainland rose 318 per cent from the previous year to 9.64 trillion yuan (HK$12.2 trillion), the central bank said.

Zhang Meng, an analyst with Beijing-based information technology consultancy Analysys, said providing payment services would be in line with insurers' development strategies as they hope to capitalise on the business opportunities offered by internet finance.

Online insurance sales last year surged about 810 per cent to 29.1 billion yuan from 3.2 billion yuan in 2011, representing an annual growth rate of 202 per cent, the Insurance Association of China said.

"The market potential for e-commerce [in the insurance industry] is huge. We can see that insurance companies, agencies are selling insurance policies online, while these products are also available on Taobao and online retailer Jingdong," Zhang said. "But there are already many third-party payment service providers that have set their sights on the market."

In terms of technology and services, it's difficult for insurance companies to compete with existing e-commerce and third-party payment companies, Zhang said, noting that the payment service would be limited to their own internet finance business.