Baidu is trying to get back into China’s fintech game by patenting a blockchain technology for payments that emphasizes security – a move designed to integrate Baidu into the government’s views on cloud hosting.
On January 12, the company filed a patent for a blockchain protocol that enhances personal privacy and users’ control over their data.
This builds on Baidu’s “Xuper Chain” blockchain platform that was launched in May, 2019 and went into beta in January 2020 amid a lot of hoopla.
Baidu has yet to become a relevant fintech player, however. Baidu is one of China’s foremost internet companies – the B in “BAT”, for Baidu, Alibaba and Tencent. But the Shenzhen-based company, although strong in artificial intelligence, search and autonomous vehicles, is not a player in online payments.
Without payments, it has not been able to wedge its way into other financial services such as lending, wealth management or insurance. Nor does it play a persistent role in peoples’ everyday lives: it lacks the equivalent of Alibaba’s e-commerce sites or Tencent’s WeChat app for gaming and social messaging.
New fintech footing
The tech landscape in China is changing, however. The government’s controversial decision to quash Ant Group’s IPO, and its subsequent re-regulation of fintech platforms (especially with regard to lending), is one example of change.
More profound changes have also been taking place at the level of infrastructure. President Xi Jinping endorsed blockchain technology in a speech in October, 2019, touching off a frenzy across the country to reimagine all manner of processes.
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Another aspect of this is a government push that emerged in early 2020 to move finance-related engagements in the cloud to be stored and computed exclusively in a “Fintech Community Cloud”, overseen by domestic cloud providers such as the BATs, plus Huawei and joint ventures with foreign companies.
As far back as 2016, the China Securities Regulatory Commission proposed the idea that regulators needed access to cloud-stored data to monitor and audit financial transactions, and take enforcement actions. According to local media reports, last year authorities began having private conversations with financial institutions, including foreigners, to get them to comply.
Head in the clouds
Cloud is another area where Baidu trails its erstwhile peers. It is several years behind. In the third quarter of 2019, the first time Baidu disclosed cloud-related revenues, it reported Rmb1.3 billion, versus Rmb9.3 billion at Alibaba and Rmb4.7 billion at Tencent.
Some of this gap is structural: Alibaba and Tencent process vast consumer-related data across payments and their other businesses.
Baidu’s latest developments for its XuperChain seem designed to assure users of privacy within the context of the Fintech Community Cloud. If banks and tech companies decide complying with regulatory concerns can be made efficient and trusted by users, this could give Baidu a leg up.
Baidu is still a business focused on enterprise customers more than retail. Just as Alibaba and Tencent have used payments as a gateway to serve consumers more value-added services, Baidu appears to be using payments to enhance its cloud offering.
Joyce Gao contributed to this story.