Lufax is really overthinking the design in lufax route

This morning (August 14), I saw a piece of news about Lufax's plan to transform into a P2P platform Tmall. The author tried to interpret it.

The original intention of transformation

The intention of this transformation is mainly because Lufax felt that the original self-operated model was too small in scale and its valuation was not high enough, so it wanted to transform into an open platform model.

Let me give you a simple analogy: I think the valuation of JD.com is too small, and I want to do Alibaba's Taobao or Tmall model, because the former is worth more than 40 billion US dollars and the latter is worth 200 billion US dollars.

Ma Mingzhe is very ambitious, and JD.com alone obviously cannot satisfy his appetite.

Lufax’s transformation

Originally, Lufax's projects came from two aspects:

1) P2P credit business, which is Lufax’s own project

2) Brother company, which is a subsidiary of Ping An Group, is on the same level as Lufax

Since the "Guidelines on Internet Finance" stipulates that the listed entity must be an information intermediary, the first part of the business mentioned above was separated and placed in the newly established Ping An Puhui.

Therefore, the subject of the listing, Lufax, does not hold any assets, meeting the requirements of the Guiding Opinions. It is a P2P company with pure self-operated business, similar to JD.com before the implementation of the open strategy, but only JD.com's self-operated business.

To describe it with a picture:

However, Ma Mingzhe is more ambitious. He feels that the asset side of Lufax’s sister companies is not enough and their listing size is too small (of course, most of the current P2P platforms are at this level).

Therefore, we need to change it to a non-standard asset center and allow institutions to participate, such as trusts, asset management, funds, small loan companies, etc., to become a non-standard asset center, so that the scale will become much larger. It is similar to what JD.com is like now: part of it is self-operated business, and the rest is non-self-operated.

With the development of Lufax, Ping An still thinks that the JD model is too small. It would be better to choose Alibaba Taobao Tmall instead.

So, there was the news this morning (August 14). Lufax is going to adopt the Alibaba model (because of the high valuation and large market)

We need to intervene in P2P companies and encourage them to come to the Lufax platform.

What services are provided? Product design, credit risk control, system platform, collection services and other advantageous businesses and technologies. This means that in addition to being a transaction center, Lufax also wants to be a technical service provider, similar to opening a franchise store. If you are a P2P platform, I will sell you brand technology, etc.

The idea is good and naive, but what’s the problem?

It should be said that Lufax's current transformation is very strategic on the surface. If it can be successful, it will be the next Alibaba. I have no doubt about this.

However, there are too many problems with such a grand strategic goal. I will just mention a few:

1) Internet finance has become a red ocean now. If you want to do Taobao or Tmall, you need the right timing.

At this stage, hot money is pouring in to the Internet finance industry, and competition is already fierce. To be more specific, doing Tmall now is a bit like in 2009, when you said you wanted to do e-commerce and create a Taobao. The reason is that there is no Taobao in the current Internet finance industry.

But the timing is not right. It’s too late if you are still thinking about creating Tmall for Internet Finance at this point.

2) Lufax is very strong, but it is still far from being a dominant force

If this plan had been put forward three to five years ago, and Lufax had achieved what it has today, then there is no doubt that you would have been able to do it well, but the key issue is that Lufax currently does not have that much of an advantage over other companies.

Alibaba can cover more than 50% of the e-commerce market share, but Lufax does not have that strength now. Now is the era of competition among many players rather than oligarchic rule.

With the entry of Ant Financial, Fosun and Jiuding, Ping An has advantages, but they are not that big.

3) P2P platforms will not be content to be a platform under Lufax

Lufax’s intention is very clear, it wants to be the leader and other platforms are its subordinates.

However, at this stage, how can any platform with a little scale and fame be willing to be your younger brother?

You are not the United States with a bunch of lackeys following you. You are just China. Lufax’s influence is still limited.

4) They are still thinking about exporting risk control, design, etc. This is the design in lufax route.

This route is very high-end and follows the design route.

For example, what he does now is to provide chip manufacturers such as Qualcomm with a package of chip system solutions, from which he charges a certain fee or commission.

It would be awesome if this could be done, but does Ping An have the capability to do so?

Each platform has different businesses, different risk control focuses, different products, and different humanistic environments, which leads to different debt collection. If you want to be a system solution provider, it seems impossible.

5) If it is a single item, it may be okay

Ping An now has two considerations, which can be divided into two parts:

1) Build an ecological platform and allow P2P companies to become suppliers of platform financial products

2) Be a system solution provider and provide all-round solutions for P2P platforms

Looking at the world and the development of business to date, I can’t think of any example that can do well in both of these two similar fields. Either it is like Apple, which only has an ecosystem but cannot be a system solution provider; or it is like Google, which only has a system but no ecosystem.

If Ping An does just one thing, there may be hope, but if he wants to do too many things, that would be wishful thinking.

Lufax’s current idea is like opening a casino. I provide the platform, and I also provide the cards or the ways to play the games. Both the platform and the investors collect money. That’s really a good way to play it, and you’re overthinking it.

Maybe Lufax hasn’t figured out what it wants to do yet, and this strategy is really surprising!