Big data and the connectivity provided by the internet is allowing corporates to get to know their clients with unprecedented accuracy and offers a huge opportunity to further drive profits.
‘Know your client’ has been a mantra in financial services for many years. Now corporates are aggregating and analysing consumer data to improve operating efficiency and their customers’ experience.
From a recent McKinsey report — “Getting Big Impact from Big Data” — which suggests that just 0.5% of all data is ever analysed and used, and that retailers able to fully leverage their data analytics could increase operating margins by 60%. Another report from global data firm IDC, in collaboration with IBM, expects the digital universe to double in size every two years, and for emerging markets to account for two thirds of all data generation by 2020.
Investors need to be aware of this trend and position portfolios to take advantage of it. A recent visit to Asia underlined my view that China’s internet giants Baidu, Alibaba, Tencent (“BAT”) continue to lead the way as they tap into the habits of China’s 700 million internet users. More than 95% of them use mobile to access the internet and spend an average of three hours a day on their smartphones, according to local media reports.
Chinese policymakers are supporting several important initiatives on Big Data, providing a secure base for business development.
Tencent operates the largest social media platform in China through WeChat, which captures 30% of total daily mobile app usage. Both Tencent and Alibaba have launched their own ‘Social Credit System’ and use it as part of their risk assessment for their e-finance products. It is based on their users’ social connections, consumption behaviour, security, wealth and compliance. This is also used as a marketing tool as users who spend more money or time on the apps are rewarded with improved ratings and benefits.
Alibaba is the leading e-commerce player and mobile payment platform in China. Alibaba’s newly introduced Brand Databank is based on their 507 million users. Early case studies suggest brands can improve marketing conversion rates by 70%. In addition to BAT, other players are providing services to help companies leverage their data. Baozun, the largest e-commerce solution provider in China, serves as the gatekeeper for retail brands, especially foreign ones, helping its clients establish a presence and deliver their products. China is already the largest e-commerce market in the world with sales estimated to be $1.1 trillion in 2017.
India has the second largest internet base in the world, with 460 million users. As in China, there is significant government backing for the development of the country’s online infrastructure. Consumers are increasingly drawn into the system as they are required to give their data in exchange for government services. India’s biometric ID database Aadhaar has the fingerprint and iris scan of 1.1 billion users, more than 99% of the population above 18 years old.
This is a significant accomplishment given that, according to UNICEF, 40% of the population is not registered at birth, and 25% are illiterate. The private sector is also benefitting with firms such as Microsoft using Aadhaar as ID for Skype Lite, or Vakrangee using it to authenticate many of their transactions including Amazon purchases.
ASEAN is also prompting interest from global internet players. ASEAN e-commerce is more fragmented and underdeveloped than in China, factors driving significant investment. The World Economic Forum notes that if ASEAN was a country it would rank third for global mobile subscribers, after China and India.
Specifically, Indonesia is attractive as it is world’s fourth largest population with 53% of the nation under 30 years old. It has seen over $3 billion in total in investments into private e-commerce firms Lazada, Tokopedia and Go-Jek in the last 2 years. In Malaysia, the government launched eGov 3.0, which focuses on “dynamic information and using online services to create opportunities for public participation.” MYEG (My E.G. Service Berhad) is one beneficiary, awarded a key role in digitising Malaysia’s immigration work permit process.
E-commerce is not the only sector to benefit from consumer data this year. The growth of video game companies such as Activision and SEA Ltd has been driven by earnings from digitisation and data utilisation. Their successful engagement and monetisation are largely down to analysing their players’ consumer behaviour. ASEAN has the fastest growing e-sports viewership base and is expected to reach 19.8 million enthusiasts by 2019.
Overall, the opportunity Big Data analytics can provide is huge, with the data economy predicted to grow from $150 billion in 2017 to $210 billion by 2020. Our AGEM strategy has a significant weighting to this exciting sector in China in particular and will continue to be an important driver to our performance.
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