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Alibaba.com (HKG: 1688)’s Powerful New Data Service

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As the leading ecommerce retailer in China, Alibab.com (HKG: 1688) undoubtedly has an unparalleled wealth of data on online shoppers and vendors. This invaluable collection of data could significantly reshape the Internet and life beyond.

Since 2010, the Chinese ecommerce giant has been helping to extend small loans by using its own advanced technology to analyze data. This technology sets the path for computing services that plan to commercialize this innovation.

Alibaba debuted its new data service on July 8th, unveiling how other companies could utilize the data. Named the Open Data Processing Service, or the ODPS, this service enables users to enter Alibaba’s servers remotely and access algorithms that can process in six hours the amount of data equivalent to 100 million HD movies.

An executive of Alibaba’s cloud computing department stated that using the ODPS is similar to using a juicer. The user gives the program the parameters, and push a button for the juice to flow – results depend on the raw data as well as the computing algorithms.

Aliloans, Alibaba’s small loan branch, has already tested out the program. It has used the program to determine lending risk and grant loans to companies and vendors through the company’s shopping websites.

Study shows that the algorithms in these programs have significantly cut the costs of making loans far below the cost for banks. At the same time, the program keeps bad loans under control. Every loan that Aliloans makes costs 0.3 yuan, which is approximately 0.001% of the cost to a conventional bank. However, the company’s bad loans accounted for roughly 1.3% of the total number of loans made, a slightly higher figure than the average 1% of traditional banks.

It is important to note that the loans that Aliloan makes are all unsecure – meaning that the borrowers are not required to put up any collateral. This heightens the importance of pre-lending risk calculation, since the lender cannot seize any assets if the borrower defaults on their loan.

Aliloan evaluates this risk by analyzing the data from Alibaba’s shopping websites and Alipay, a payment service operated by Alibaba.

Alibaba_Group

Increasing Abilities

In addition to evaluating loans, the ODPS possesses an algorithm that can detect vendors who are too aggressive in certain areas and lacking in others by analyzing a collection of data, including promotions and profit margins. These algorithms can offer suggestions to vendors on how they should modify their businesses and provide financial support appropriately.

With Alibaba’s impending IPO and recent increase in the company’s valuation, the success and innovation of its new data service is no doubt an asset to the company.

This fiscal year, Alibaba brought in $3.77 billion in net income – a 170% increase from the last fiscal year, $8.45 billion.

 

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