eToro’s massive influx into China – one year on. Live interview with APAC CEO Jasper Lee in Shanghai

What a difference a year can make.

Almost exactly one year ago, FinanceFeeds met Lance Liu, Investments Director at Chinese venture capital firm PingAn Ventures here in Shanghai, to discuss the recent investment that Ping An Ventures had made in prominent social investment platform eToro.

eToro has for many years trodden a very different path from its peers, and to great gain, especially in today’s post-social trading era in which separate platforms that provide social trading to retail customers whilst charging a license fee to brokerages have become extremely passe.

The unfortunate fading into the background of some of the stalwarts of the social trading business as retail traders become increasingly self-empowered has made its presence felt this month, however eToro continues to go from strength to strength as a fully integrated social investment platform, with a very different ethos to the ubiquitous ZuluTrade or Mirror Trader model.

Joining existing investors which include Russian financial institution Sperbank and Germany’s Commerzbank, Ping An Ventures provided a round of funding in early 2015, sparking speculation that eToro had its eyes on China.

FinanceFeeds asked Mr. Liu during that particular meeting what the rationale was for such an investment on eToro, to which he replied “Our core business is investment in financial services firms, and there are many good business models overseas with good technology which China does not yet have. We have a large market to serve so we have a remit to invest in new technology and foreign business model and bring it into China.”

“eToro’s collaboration with us is on two fronts” said Mr. Liu. “One is a cooperation on the social investment side, whilst we also invested in the fintech side of their business.”

How was this structured?

As part of the structure of the new venture that is currently being created, Mr. Liu explained “At this stage, we did not establish a joint venture model with eToro because we wanted to do a trial first. Sometimes we do joint venture and sometimes not, it depends on the business itself. This time we just cooperate on a commercial level.”

“eToro created a wholly owned foreign enterprise (WOFE) which is in the process of registration and is a fully owned subsidiary under eToro. The market here in China is less strict than it was before, and it is less hard to open in China as it had been previously, as long as there is government oversight and input.” – Lance Liu, Head of Investment, Ping An Ventures.

We asked Mr. Liu whether Ping An had become more of a technology company than a financial services company these days, to which Mr. Liu replied “We are very much a fintech company so nowadays, the technology aspect of finance is our priority. There is a very large fintech incubator within Ping An Group. LUFAX (Lujia Zui Financial Asset Exhange) is a large enterprise that was started with investment from Ping An, and that company rose to become the largest B2B platform that now concentrates on asset securitization. I was also involved in the acquisition of the two payment companies in 2011. We injected our own management structure, and merged them into one company.”

Here we are, one year later, and the fruition of eToro’s foray into China is absolutely apparent.

Today, here in Shanghai, FinanceFeeds met with Jasper Lee, CEO of eToro’s Asia Pacific operations at the annual FX industry conference hosted by YOCA in conjunction with FinanceFeeds, at the prestigious Renaissance Zhongshan Park Hotel.

Mr. Lee explained “We started the whole operation in 2016, mainly as a direct result of the investment from PingAn. In 2015 we gained investments from Sperbank and Commerzbank as well as PingAn which is also a bank.”

“In Russia we have a joint venture operation with Sperbank, whereas in China after the investment by PingAn, we decided to start the company’s operations within China. In Early 2016, we formed a fully operational team in China, which included every aspect of the commercial structure of the company from marketing, to account management, right the way through to infrastructure, and we began to build up the network with different media channels, which is vital in China” said Mr. Lee.

“As far as marketing is concerned, companies have to be very focused on localization, and have to understand how to use the correct channels within China across all aspects of their business” said Mr. Lee. “Therefore, we promote offline as well as online.”

“For our online effort, we use a combination of SEM, as well as media cooperation with entities in mainlaind China, Hong Kong and Taiwan. In order to make a proper and comprehensive entry into China and effectively land smoothly, we did alot of localization.” – Jasper Lee, CEO APAC, eToro

An important aspect to bear in mind is that eToro has been operating for ten years now, and has a completely globalized structure. “In China, the environment is completely unique” said Mr. Lee. “China is home to a huge potential client base, but localization is vital. eToro is a social platform so that people can communicate with each other, therefore to make our entry into China successful, we had to make a series of vital amendments such as the ability to be able to translate all the account details from English (which globally is the largest language base) in one click into Chinese” Mr. Lee told FinanceFeeds.

“There are sutble differences between Chinese platform functionality compared with that of other regions that had to be taken into consideration too. For example, Chinese traders see the up and down indicators in different colors to those offered on platforms ovesees. In China, if the market moves up, the indicator is displayed in red, wehreas if the market is going down, it is displayed in green which is the opposite of the rest of the system used in the rest of the world” – Jasper Lee, CEO APAC, eToro

Additionally, eToro has geographical preferences, therefore if an IP address is Chinese, the trader sees all the feeds in Chinese by default, hence the interface and data has been localized to fit the Chinese market.

Diversification by leveraging the PingAn investment

Apart from the substantial effort required to market eToro to a Chinese audience, gaining investment from what is not only a bank and VC firm but also a vital Chinese partner was a strategic masterstroke for eToro.

“Due to the investment by PingAn, we are now able to utilize our mutual relationship to advantage” said Mr. Lee. “There are several different subsidiaries under the PingAn group, which include PingAn Security and LUFAX. Our synergy with these divisions was sealed in December 2016 with a memorandum of understanding having been signed” said Mr. Lee.

“With different subsidiaries we did differnt things. With PingAn Securities, we conducted some seminars. The purpose of these were to educate people in China who invest in Chinese stock, to invest in global stock, whilst abroad, we offer Chinese listed companies to Chinese traders in the US, such as Alibaba, JD, which Chinese people are familiar with so they can trade with confidence” he explained.

eToro gains access to single plaform for multi-product financial services via PingAn TOA

Mr. Lee then showcased to FinanceFeeds how eToro was able to launch an education website where the firm can provide educational resources to clients about oversees investments. PingAn’s TOA system, which provides a single log in for users, meaning users can log in to eToro platform so they can access all of the services provided by PingAn Group with just one log in.

“We have also signed a memorandum of understanding with LUFAX, and we aim in 2017 to operate together to provide services to Chinese customers who live oversees.” – Jasper Lee, CEO APAC, eToro

LUFAX has been one of the largest global FinTech firms over recent years, and the company hase a huge base of Chinese users who live outside China, and it is widely accepted that among the diaspora community there are numerous people seeking oversees investment very eagerly.

An example of that is Toronto, a city in which ove 600,000 Chinese nationals arrived between 2001 and 2009, many of which invested heavily in large scale commercial real estate and luxury high rise condos, as well as poured massive capital into Canada’s banks, saving it from the financial crisis. Far from Canada’s conservative fiscal policy, it was the Chinese investment that bolstered the economy, and now several years on, those investors have massive monthly income from rental and lease revenue, that they would trade in securities.

The future in China for eToro – more opportunities, more cooperation

“In China we have the cooperation with PingAn, but are also seeking opportunity to work with other financial institutions and are highly open to any cooperation here in China. Here we see partnership potential with IB as well as retail clients. Referral broker relationships are very important to penetrate the Chinese market” concluded Mr. Lee.