Why China's Didi is Trying to Become a Fintech Giant The ride-hailing company has rolled out a range of financial and insurance services

Ride-hailing giant Didi Chuxing has been going through several changes in the past few months. After an announcement of company-wide reorganization in December, the Chinese unicorn has now rolled out of a suite of financial and insurance services in its mobile app for its drivers and users.

The services include health insurance, car insurance, credit and lending, wealth management and auto-financing options. The offerings have been integrated within Didi's app, but they can also be accessed via a separate app, called Didi Finance. Prior to the nationwide launch, the in-app services were trialed in 10 cities, including Chongqing, Zhengzhou and Foshan.

New strategy

"On the whole, financial services are expected to help Didi build a stronger network of collaboration and shared interests, and in turn, a tighter and more efficient transportation ecosystem," the firm said in a statement.

Through its auto financing solutions, said Didi, it will work with its new auto solutions business to "expand a quality supply base for China's vibrant mobility market by creating effective links between top-tier drivers and partners and a high-quality supply of new energy vehicles, through competitive and reliable purchasing, leasing, trading and financing services".

The step to diversify outside the ride-hailing business comes after a year of safety scandals, and reported losses. At its core, Didi, which has investments from the likes of Alibaba Group, Ant Financial Services Group and Apple, offers a range of transportation services for 550 million users, including taxi, express, premier, bus, designated driving, bike sharing and car sharing, ferried around by over 30 million drivers. Despite having a strong presence in China, the previous year didn't end on a happy note for the company.

In September 2018, the company's chief executive and founder Cheg Wei sent an internal letter to employees, stating the company has not turned a profit during recent years, and suffered a net loss of 4 billion yuan ($582 million) in 2018's first half alone. Besides this, Didi has come under fire over safety concerns.

Safety first

Two passengers, both female, were killed in separate incidents involving Didi drivers. Both the women were using Didi's profitable carpooling Hitch service. In 2017 too, two female customers were killed by their Didi drivers.

Considering the risks involved, the Ministry of Transport in late November 2018 said Hitch would remain offline until it corrected its safety problems, making things more difficult for Didi as far as profit was concerned. To address the safety issue, Didi announced a reorganization plan last month. In a post on its official WeChat account, the company said it would create two top positions, a chief safety officer reporting to Cheng, and a chief information security officer reporting to chief technology officer Bob Zhang. "Safety is the number one priority for our users. The committee members responsible for safety will promote and implement safety reform work, invest in online and offline resources, and thoroughly improve our standards for safety," the company said, attributing the comment to both Cheng and Didi President Jean Liu.

Challenges ahead

The move to roll out financial services is a way for the company, founded in 2012 in Beijing, to generate a new stream of revenue. It comes at a crucial time as well.

From the first day of 2019, the government has tightened regulation for ride-hailing drivers. They are required to hold two licences, one for the cars they operate and one for themselves; a local hukou, a difficult-to-obtain residency permit that clears them for work (they would need to provide a no-criminal certificate); and a permit to operate their vehicle for commercial purposes, which means paying additional fees.

Such restrictions will narrow the pool for Didi drivers, many of which are from China's rural areas. It remains to be seen whether the new move, though necessary, will help Didi remain relevant and successful.