Didi Chuxing wants in-app financial services to drive growth

Written by Kapronasia || January 09 2019

At first blush, Didi Chuxing doesn't seem in dire need of a new business model. As China's top ride-hailing app, the Beijing-based firm boasts more than half a billion users and millions of drivers. Granted, it has been burning money for years, but that's par for the course among unicorns - tech startups valued at US$1 billion or more - and some analysts believe Didi could raise up to US$80 billion in an expected 2019 IPO.

With that type of valuation, Didi's loss of RMB 4 billion (US$585 million) in the first half of 2018 seems manageable. Still, following that performance it's hard to imagine Didi achieved its stated goal of turning a profit in 2018, even if the company did better in the second half of the year. In its six years of operation, Didi has never been profitable.

As the IPO looms large, Didi is looking to reassure investors that it will, one day soon, be in the black. To do so, the company will need to capitalize on its massive user base by offering them something they want. Didi thinks the answer is digitized financial services. Naturally, all of the services are conveniently accessible from the Didi app, and there are quite a few: personal insurance, wealth management, credit services, car loans, and even crowdfunding products for critical illnesses. The launch follows Didi conducting trials of the in-app financial services in 10 Chinese cities, among them Chongqing, Zhengzhou and Foshan.

In its push into digital finance, Didi is following in the footsteps of fellow tech juggernauts Alibaba and Tencent, who have long been locked in fierce battle for control of China's red-hot digital payments market.

New ride-hailing regulations effective January 2019 that will considerably reduce Didi's driver pool are also pressuring the firm to diversify its revenue streams. The new regulations require drivers to hold a hukou (residency permit) for wherever they are working. Obtaining a hukou for China's biggest cities, like Shanghai, Beijing and Shenzhen, is difficult for people not born in those places to local parents. Many of Didi's drivers are migrant workers and won't qualify to drive for the company under the new regulations. Further, drivers must prove they have no criminal record and possess a permit to operate their vehicle for commercial purposes.

"On the whole, financial services are expected to help Didi build a stronger network of collaboration and shared interests and in turn, a tighter and more efficient transportation ecosystem," the company said in a January statement.

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