How AXA could leverage its new partnership with Alibaba (BABA)
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French insurance giant AXA has formed a global strategic partnership with Chinese e-commerce giant Alibaba and its affiliated payment platform Ant Financial.
The three parties will work together to develop innovative new products that can be offered to customers globally, support each other in international expansion, and target new market segments.
The first phase of the partnership will focus on three areas: AXA will develop insurance products like online payment protection for AliExpress, Alibaba's global retail online marketplace; it will provide insurance products for small- and mid-size businesses that use Alibaba's wholesale marketplaces; and it will offer travel insurance products through Ant Financial to Chinese travelers going abroad.
The partnership provides AXA with new opportunities to help it compete with insurtechs.
- Cementing its position in China. AXA has a significant presence in Asia, with around 10% market share in Hong Kong, Indonesia, and Thailand. In China, its share is much smaller, at around 1%, and AXA likely hopes it will be able to leverage Alibaba's knowledge of the Chinese market to expand that share.
- Access to new market segments. Partnering with Alibaba gives AXA access to a new distribution channel and Alibaba's massive base of online shoppers. Alibaba has over 367 million active customers, excluding its small business customers.
- Data. AXA will likely be able to leverage Alibaba's customer data to better target prospects. This could be invaluable when it comes to creating the "bespoke" products that it hopes to create for Alibaba's customers.
The partnership highlights a growing trend across the insurance and tech industries — convergence. Technology is opening up new opportunities throughout the insurance value chain. Rapid advances in data collection and analysis mean better customer segmentation and more opportunities for cross-selling products, as well as improved digital distribution channels for those products. And there is growing demand from consumers — 23% of millennials globally would buy insurance from a technology provider.
We’ve entered the most profound era of change for financial services companies since the 1970s brought us index mutual funds, discount brokers and ATMs.
No firm is immune from the coming disruption and every company must have a strategy to harness the powerful advantages of the new fintech revolution.
The battle already underway will create surprising winners and stunned losers among some of the most powerful names in the financial world: The most contentious conflicts (and partnerships) will be between startups that are completely reengineering decades-old practices, traditional power players who are furiously trying to adapt with their own innovations, and total disruption of established technology & processes:
- Traditional Retail Banks vs. Online-Only Banks: Traditional retail banks provide a valuable service, but online-only banks can offer many of the same services with higher rates and lower fees
- Traditional Lenders vs. Peer-to-Peer Marketplaces: P2P lending marketplaces are growing much faster than traditional lenders—only time will tell if the banks strategy of creating their own small loan networks will be successful
- Traditional Asset Managers vs. Robo-Advisors: Robo-advisors like Betterment offer lower fees, lower minimums and solid returns to investors, but the much larger traditional asset managers are creating their own robo-products while providing the kind of handholding that high net worth clients are willing to pay handsomely for.
As you can see, this very fluid environment is creating winners and losers before your eyes…and it’s also creating the potential for new cost savings or growth opportunities for both you and your company.
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