Didi Finance, the fintech arm of ride-hailing service provider Didi, shut down its online mutual aid platform Diandi Shouhu on Monday. The termination took place at a time when financial services provided by tech firms face intensified scrutiny by regulators.
The mutual aid platform, which is organized based on crowdfunding and assists participants who fall ill with their medical bills, has served over 1 million people since its founding in 2018, but it suspended new user registrations in April. Didi Finance said in a statement that Diandi Shouhu’s shutdown is due to a change in business direction.
Mutual aid platforms were once seen as alternatives to conventional health insurance policies. Many thousands or even millions of participants pitch in with small payments on a regular basis, and those funds are directed to participants who must pay for unexpected medical bills.
These platforms became hugely popular in China in recent years. They attracted more than 150 million users in 2019, according to an online mutual aid white paper published by Ant Group.
This business model relies on economies of scale, so China’s tech giants flocked into the sector as early as 2018 and attempted to leverage their massive user bases. Ant Group’s Xiang Hu Bao was one of the preeminent platforms. It amassed over 100 million members after launching in 2018. Tencent-backed Waterdrop (Shuidi Huzhu) and Qingsong Huzhu were also popular options. Food delivery platform Meituan, Didi, and even smartphone and IoT product maker Xiaomi also developed their own mutual aid businesses.
But tech companies were offering these financial services and insurance-like coverage without official credentials. The authorities became increasingly concerned about the potential risks and began to rein in the service providers. In September 2020, rules were established to require all companies operating in this space to obtain the relevant licenses.
Many mutual aid platforms were subsequently shut down. Meituan ended its healthcare coverage in January this year. Then, Tencent’s Waterdrop and Qingsong Huzhu abruptly halted their mutual aid services in March. Waterdrop continues to operate its conventional insurance business and went public on the New York Stock Exchange in May.
Speaking at a press event in April, Xiao Yuanqi, a spokesperson of the China Banking and Insurance Regulatory Commission, said that financial and insurance service providers that operate under the guise of medical cost assistance or charity were conducting business beyond the scope of mutual assistance. Xiao called for tighter regulations in this space.
Now Alibaba’s Xiang Hu Bao is the only major platform left on the market, and it’s likely to become a regulated business, according to The Wall Street Journal. The WSJ also reported that authorities will probe state-backed financial institutions’ ties with private firms, and Ant and Didi are among the companies of interest.