Jonathan Larsen - CIO at Ping An - on their $1bn global fintech fund
David M. Brear interviewed Jonathan Larsen, CIO, Ping An and CEO of their Global Voyager Fund, a $1bn investment fund, specifically for fintech. He tells David all about the fund and the innovations in fintech coming from China and making a huge impact worldwide.
"We are continually scouring the globe, literally, to make sure we have access to cutting edge technology and ideas."Equally, we have very significant development capabilities ourselves. We have 20,000 developers, we have world class facial recognition technology, we have world class voice technology, we have platforms that run on blockchain, at scale, every day already, so we’ve got a lot of technology resources, and we can co-create, in specific situations, with partners, where that’s warranted. So, we’re very interested and keen to see whether that’s something we can bring to bear as a capability. I think that could yield some extremely interesting partnership opportunities and results. Lastly, I think the group, while it is overwhelmingly a China-based enterprise, it has some global portfolio management activities, and has historically had venture capital activates on a global basis, but overwhelmingly its client franchise is in China, we’re now at a point where we can be looking, in a very disciplined and thoughtful way, about international opportunities, and some of those opportunities might come through partnerships in the fund. That’s really interesting, and amazing, really - a $1billion fund for fintech. This is a huge thing. What particularly, are the things that are interesting you in fintech for healthcare? Well, I think for Ping An, Ping An has the broadest range of licenses and businesses in financial services in China so, you know, we’re a very large insurance company. We’re the largest insurance company in the world, by market cap. It’s a big life insurer, big P&C insurer. We are a large bank, we are a large securities company, we’ve got an asset management group, we have a trust business, we have a whole raft of new generation businesses that have been created, mostly in the last five or six years, in financial services. So, we have a very broad spectrum of businesses, and therefore, the applicability of fintech technologies is extremely broad, as well. Obviously, we have to focus on what’s going to provide the most yield, what’s going to be most helpful, what’s going to be most complementary. On the healthtech side, you know, health is a really interesting space for us. There’s a thesis where it’s arguable that health is actually an even bigger opportunity, over the longer term, than financial services, in China, just given the state dominated health system today, continuing pressure on state health budgets, the fact that, you’ve got a rising wealth profile in the population, you’ve got an ageing population, and you’ve got a dramatic shift that’s already taken place, and will continue to take place, in consumer expectations. Some of the health services in China are absolutely excellent today, some leave quite a lot to be desired, and have a lot of evolution potential. What we’re interested in, in health, is really information-based businesses. Our interest in the health space arose out of our own health insurance business. Private health insurance is only 5% of the market today, for health spending, 50% is government, the rest is out of pocket. We have a very large position within that 5%. There’s basically no scenario we can see where that can’t grow at above 30%, almost forever, just given where we are right now. We’ve, alongside our own health insurance, we’ve got a platform called GoodDoctor.com, which is a telemedicine practice, online, mostly driven by chat and image, with real doctors. Some of them are employed by us, and some are a broader network, think of it like the Uber of doctors. [GoodDoctor.com] has 140 million users today, it was valued at $3 billion at its last valuation round. Or last funding round. We have a clinic platform, called Wanjia Clinics, which supports an enterprise platform for about 30% of the clinics in China. We actually have an administration platform that supports the government health insurance in about 250 cities, touching an astonishing 600 million in China. So, we’re actually administering health payments, and we’re helping those municipalities manage fraud, and manage over-servicing. What we’d love to do is eventually, potentially, take over the liabilities, and manage those liabilities on behalf of some of those municipalities, on an actuarial basis. Of course, we need the data flow to be able to drive that, and we need to have some ability to influence the way in which health services are delivered in those municipalities. [...] It really is an ecosystem, but sitting beneath all of that, we have something we call our Health Data Cloud, and that’s essentially, a profile that we’re building up of everybody that we touch.
"We really see the future as being an information-led future, and our business being an information business."We really see the future as being an information-led future, and our business being an information business. Increasingly, we see financial services and the value that can be generated as depending less on capital, and physical assets, and much more on information assets, and ultimately the value coming from data use cases. And we see the same thing in health, and ultimately, we think of our core competency, and core assets, as data, then you don’t really need to have fixed industry boundaries at all, and there are many other industries where a similar model could be applied. It could be travel, it could be retailing, it could be education, etc. We have some of those businesses, we have a platform called Autohome, which we acquired, interestingly, from Telstra, Australia, about a year and a half ago, in Beijing, which is the largest auto trading website in China. So, we’ve got some of those. But I guess, as we look in the health space, you can get the flavor from the ecosystem I described, that we’re not particularly interested in hard asset businesses. At this stage, we don’t really want to own hospitals, we don’t think we need to do that. We don’t particularly want to be in the equipment business, we don’t particularly want to be in the pharmaceutical business. All of those are globally competitive industries, they’re capital intensive, they have long development cycles and technology replacement cycles. So, they’re some way away from, you know, Ping An’s natural adjacencies. Our natural adjacencies are database businesses, where we can add value. So, in the clinic platform, for example, or in the Good Doctor, or even in the state health insurance, remote diagnostics can be a huge opportunity, and there’s a vast amount of innovation happening in that space around the world, in the States, in Europe and in Asia. India is an interesting source of innovation there, as well, alongside China. So, remote imaging for radiology, for CT scans, for endoscopy, and remote diagnostics, whether they be AI based, or even simply centralized expertise, remote patient care- all kinds of solutions. It’s fascinating, because, the general principle would be, do one thing and do it amazingly well. But at the scale that you can do it, in China, or India, it changes the dynamic - you’re perfecting techniques and then applying them to different industries, which I find absolutely fascinating. It seems like you’ve got a $1 billion fund, but you’ve got trillions of opportunities in that area of the market, which is fantastic. I think that’s right, and I think what’s probably little understood is the scale of the China consumer market, where you can take a product, and scale it to 100 million users, or 150 million users. We have 350 million digital users in the group today, across all of our platforms. Lufax, Good Doctor, Autohome, all of the financial services businesses. There is nowhere on earth where that type of scale is attainable for these kinds of businesses, and I think that, over time, will have massive implications for the global consumer economy, and the models that can be proven in large markets like China, and actually deployed around the world. I think we’re already seeing a reverse flow, or reverse direction of flow of innovation, from China to elsewhere in the world. Whereas we saw that flow come very much to China, probably ten years ago, and many of the models that were built in China, scaled in China, were derivative from overseas models, we’re now seeing that innovation and direction of flow shifting, and I think that China’s scale will be key to that.
"I think we’re already seeing a reverse flow, or reverse direction of flow of innovation, from China to elsewhere in the world."Scalable platforms in China make the scalable platforms that people talk about in Europe look like nice little playthings - if you want to add another 100 million on something that’s got hundreds of millions of people on there already, it seems like an easy thing to do. Whereas [to] a bank in the UK with 10 million customers, it seems like a big deal. Everything is relative, I guess! You talk to a startup here, and if they’re two years in and they’ve got 125,000 customers, that sounds fantastic. You know, a really well-established company, worth billions of dollars, might only have a million, 1.4, 1.5 million customers. Obviously, that’s already very good and commendable, it’s highly monetizable, and companies that fit those criteria are very well recognized today, and very widely admired, but in China, we do have the opportunity to, essentially, do the same thing at 50 or 100 times the scale. Scale, distribution and customers are always the best things. Thank you so much for joining us, I really, really appreciate you coming and spending the time with us. Where can people learn a little bit more about you, and about the fund? Well, they can track us down, we’re based in Hong Kong, and they can feel free to seek me out directly, I’m on LinkedIn. David M. Brear was talking to Jonathan Larsen at Money20/20 Europe in Copenhagen. For more information, see Jonathan's LinkedIn or listen to the full interview on Fintech Insider.