Zhaocaibao: What are the risks behind innovation?

The Internet industry and the financial industry have never been so closely connected. However, people in the financial industry are primarily concerned with "risk", while the keyword for the Internet industry is "innovation". So what are the risks of Zhaocaibao, an innovative product of Internet finance?

On August 25, the Small and Micro Financial Services Group (in preparation) officially released another Internet financial innovation, "Zhao Cai Bao", after launching Yu'e Bao. Zhao Cai Bao is not the first to be launched. Since its launch on April 10, the transaction amount has exceeded 10 billion yuan.

To analyze the risks, we must first look at what Zhao Cai Bao is.

It is understood that Zhaocaibao is an open investment and financial management platform. Zhaocaibao does not issue any financial products or loan projects, does not set up a capital pool, and does not provide guarantees for both parties to the transaction. Yu'ebao is an online sales fund and a cash management tool launched by Alipay.

Yuan Leiming, CEO of Zhaocaibao, said that as a platform for selling financial products, Zhaocaibao has cooperated with more than 40 domestic financial institutions, and more than 100 financial institutions are in contact. In other words, Zhaocaibao provides a platform for many domestic financial institutions to sell financial products. Zhaocaibao relies on the 100 million users of Yu'ebao and the 300 million active users of Alipay, and aggregates the purchase needs of fragmented and long-tail users to enable "retail investors" to purchase financial products with relatively high returns.

Previously, most financial products on the market had high entry barriers, with many starting at 50,000 yuan, and some high-yield financial products even more expensive. However, due to the high sales costs of financial products, they have become a game for "a few people".

In fact, buying Zhaocaibao is actually a way of "group buying" to bring together users with less money, so that everyone can enjoy the annualized returns that can only be enjoyed by large purchases. It is understood that various types of financial products are sold on Zhaocaibao, with an annualized return of about 5% to 7%.

As for the risk, the risk level of buying Zhaocaibao products is comparable to that of buying traditional financial products. Of course, because Yu'ebao has a good user base, Zhaocaibao is qualified to select the better domestic financial products for sale. In addition, the products sold on Zhaocaibao are guaranteed by China Investment and Financing Guarantee Co., Ltd.

In order to facilitate young users, another innovation of Zhaocaibao is "cashing out". Previously, products with relatively high annualized returns could only be withdrawn when the principal matured. However, young users have a strong demand for capital liquidity, and products purchased from Zhaocaibao can be "cashed out" at any time without affecting the rate of return.

For example, if a user purchases a one-year financial product with an annualized return of 7%, if the user needs to cash out within half a year, the user needs to pay a fee of 0.2% and can redeem the half-year return of the product with an annualized return of 7%.

For companies that sell 7% financial products, the financial products cannot be interrupted, so new investors need to enter the market to continue to enjoy the 7% annualized return product for a six-month period.

Yuan Leiming said that the principle of Zhaocaibao sales is like a "10,000-person relay marathon". By continuously having users "take over", retail investors can get the rate of return that only "big investors" could get before.

This will involve the second risk link. Will the user be at risk in the process of "taking over"? In fact, the user's "cashing out" involves another act of borrowing and investing. The newly generated "loan" is equivalent to the financial product purchased by the user as collateral. If the "cashing out" user does not repay directly, then the principal and interest can be given to the "investor" party after the financial product expires.

This mode of operation is actually a secured loan. As long as the principal of the wealth management product matures, it will be in the hands of the investor. Therefore, it is a very low-risk product among financial products.

In addition, Zhaocaibao has another service where users can set their expected returns. If there are suitable products in the system, Zhaocaibao will help users to directly complete the transaction. This can serve the user group who does not have time to "cultivate carefully".

Apart from the complicated principles behind it, what is directly displayed at the front end is that small users of Zhaocaibao can buy financial products with relatively high annualized yields, and can cash them out at any time. An additional 0.2% handling fee is required for cashing out.

It can be seen that there are two links in Zhaocaibao that will generate risks. The first link is the financial products sold, and the second link is the lending behavior generated by "cashing out". The first link has the same risk level as the financial products sold on the market, while the second link is a small amount of reception behavior with collateral, and the risk is infinitely close to 0.

Yuan Leiming said that getting involved in the financial sector will definitely lead to risks, and in the purchase relationship involving multiple parties such as financial product providers, guarantors, platforms, and users, the key is who will pay for the risk. On the Zhaocaibao platform, on the one hand, the financial products sold will be selected, and on the other hand, if risks occur, the user's principal and interest will be endorsed by China Investment and Financing Guarantee Corporation.

From the operating principle of Zhaocaibao, by utilizing the big data and data processing capabilities previously accumulated by Alibaba, users on the Zhaocaibao platform can complete loan transactions in a very short time, increase the flow of funds through technical means, and reduce risks through the accumulation of historical data.

At present, there are two possible sources of risk for Zhaocaibao. One is that the current transaction volume of Zhaocaibao is 10 billion, while the transaction volume proposed at this press conference is at the trillion level. When the capital transaction increases, the number of "takeover" transactions will increase exponentially, which may generate certain risks. Another risk comes from the macro policy level. If the national benchmark interest rate changes significantly, the interest rate difference between the former and the latter of the "takeover" will result in an imbalance between supply and demand between buyers and sellers.

In addition, a securities analyst friend of mine said that in capitalist countries, the financial industry has experienced unpredictable "black swan" events before, and apart from the sharp drop in stocks, China has not experienced a large-scale financial crisis. Therefore, users should be alert to risks.

However, after multiple analyses, if we exclude macro-level changes and unpredictable "black swan" events, Zhaocaibao's innovations in the financial industry using big data and cloud computing can indeed bring users products with relatively high returns and very low risks.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.