Ant Financial and Tencent: A Tale of Two FinTech Unicorns in China

With a focus on China’s biggest internet companies, Alibaba and Tencent, the case study describes their respective histories, fintech subsidiaries and platform-based ecosystems. It illustrates the strategy issues that arise from an institutional void and market uncertainty: how to determine the business model, generate unprecedented value for customers, and ultimately compete with foreign as well as local rivals. It aims to help students understand the opportunities and challenges for firms in emerging markets, the evolutionary nature of strategy-making, the digital transformation, how new business models give rise to new regulatory challenges, and how firms respond to changes in the institutional environment. The case has four parts. The first two describe the growth of Alibaba and its fintech subsidiary Ant Financial, and of Tencent with its superapp WeChat and fintech subsidiary WeChat Pay – noting how each built its own ecosystem and their mutual attempts to squeeze the other’s core business. Part 3 describes the pre-existing banking and finance industry in China. Part 4 explores their CSR (Corporate Social Responsibility) initiatives in the face of increasing regulatory and institutional pressures.

The case is suited to teach any (or all) of the following themes/concepts: 1. The institutional void in emerging markets, value innovation, new business models in banking and finance. 2. Planned vs. emergent strategy in an emerging market context or nascent industry. 3. Evolution of an ecosystem; platform/ecosystem competition and strategy. 4. Using CSR initiatives (leveraging non-market opportunities) to deal with market uncertainties.