OneConnect Financial Tech Co Ltd (OCFT) Q2 2021 Earnings Call Transcript

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OneConnect Financial Tech Co Ltd (OCFT -2.66%)
Q2 2021 Earnings Call
Aug 4, 2021, 9:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day and thank you for standing by. Welcome to the OneConnect Second Quarter 2021 Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers presentation, there will be a question-and-answer session [Operator Instructions]

I would now like to turn the conference over to your speaker today, Anita Du, Investor Relation Manager. Ma'am, please go ahead.

Anita YQ Du -- Investor Relation Manager

Thank you. Hello everyone, welcome to OneConnect second quarter earnings call. Joining me on the call, Ye Wangchun, Chairman & CEO of OneConnect, Mr. Luo Yongtao, CFO; Mr. Michael Fei, CEO of SME Banking; and Mr. Cheng Shu Fa [Phonetic] CEO of Gammano [Phonetic]. A few notes before we begin.

First, you can download the earnings press release and presentation from the IR website. Second, our remarks today will include forward-looking statements, which involve a number of risks and uncertainties that could cause actual results to differ materially. Any forward-looking statements that we make on this call are based on assumptions as of today and we undertake no obligation to update these statements except as required under applicable law. During this call, we may present both IFRS and non-IFRS financial measures. A discussion on the limitations of non-IFRS measures and a reconciliation of IFRS measures is included in the earnings press release.

I will now pass it over to Chairman, Ye, his remarks will be in Chinese translation in English will follow.

Ye Wangchun -- Chairman & Chief Executive Officer

[Foreign Speech]

Hello, everyone. Thank you for taking the time to dial into the earnings call of OneConnect, building back on the second quarter, business continued with its internal optimization in response to a rapidly evolving external environment, our revenue grew steadily and net loss ratio further improved. I'm pleased to report that OneConnect was able to achieve a good performance by focusing on sales and product strategy. The result of our continuous effort to broaden customer engagement, which was the strategy laid out earlier in the year. The number of premium customers acquired in the first half of the year is already close to last year's total establishing a solid foundation for our future development.

[Foreign Speech]

The past 6 months have been frequent turmoil for the market, although we saw changes coming from early as 2020 and started to adjust our business structure by lowering revenue from business origination. The introduction of many new regulations and the strengthening of enforcement still took us by surprise. In particular, many financial institutions needed to upgrade their business models in areas relating to online marketing and credit data. Our business unavoidably took a hit and amid this shift and the impact is expected to perpetuate. As a result, it is appropriate that we lower the full-year guidance.

[Foreign Speech]

We are proactively addressing these changes by upgrading our products, marketing and customer tools are now sales solution that empowers financial institutions in the whole process, especially, we can use existing data within financial institutions to help them boost the activities of existing customer base. Risk management service has been upgraded to an end-to-end solution incorporating system plus models plus products.

[Foreign Speech]

Only in hard time, can courage and perseverance with manufacturers only after polishing can piece of jade be finer. We have strong faith in the bright prospects of China's financial technology. With a series of regulations in place. The fintech service market will be more display, which is good news for OneConnect potential upside.

[Foreign Speech]

We will remain committed to the strategy of optimizing our business structure, upgrading our products and enhancing our customer base, thus boosting company value. In terms of optimizing our product structure, revenue contribution from business already mentioned will continue to drop, the technological capability of our organic platform will be further boosted to drive the recurring revenue from cloud services, risk management and operation support. In order to deepen customer engagement, we will shift from selling hooked products to providing tax loss business support and enabling customers through end-to-end solutions. These efforts collectively aim to increase customer value and acquire more premium customers as well as customers with revenue contribution over RMB1 million.

[Foreign Speech]

For the second half of 2021, we are confident that we can turn to some of the regulatory helping, deliver fast revenue growth especially revenue growth in third party customers, improve net loss ratio by double-digit percentage points and acquire more premium customers than last year. Thank you for your interest in OneConnect and we look forward to your continued support. Thank you.

Anita YQ Du -- Investor Relation Manager

Thank you. Thank you Chairman Ye. Next, our CFO, Mr. Luo Yongtao, will go through the financial results in more detail.

Luo Yongtao -- - Chief Financial Officer

Thank you, Anita. Good morning, everyone. Our Chairman Ye in his opening speech, the second quarter brought competitive challenges, it is encouraging to see the team continue with a strategy to reinforce products and sales, starting with the top line revenue increased by 25% year-over-year to RMB968 million in the second quarter, there was some slowdown in growth in quarter, let us go through the transaction activity first, which provide a good snapshot of the performance of our business. There are three main indicators that we look at, retail loan volume, SME loan volume and auto claims.

Retail loan by our solutions fell 14% year-on-year to RMB17.7 billion, due to a change in regulatory and operating environment for financial institutions. SME loan processed by contrast had a better quarter up by 8.4% to RMB9.1 billion. Most tightening occurred in area of homeland consumer activities promoting some of our customers to move from retail to SME. Demand for outer solutions remained strong. The number of past claims processed continued to rise by 14% to RMP 1.65 million in the second quarter. But segment, the cloud services platform was the biggest driver in second quarter. It contributed RMP 262 million in revenue or 27% of total, launched only a year ago, the business allows us to move from solution level to infrastructure level, strengthening our resilience through economic cycle.

Risk management also performed well in the second quarter. Revenue grew by 46%, to RMB106 million led by fast claim solution for auto insurance and risk analytics for banking. The diversity of our business is strong anchor, the growth in cloud and risk management more than offset the temporary stream experience in other segments. In terms of the size, operator support was a biggest at 28% of total revenue. Revenue in total, however, fell 4.6% year-over-year to RMB274 million, implementation revenue also posted a decline year-over-year by 26% to RMB159 million.

The drop in business origination also continued, just down by both internal and external headwinds, as we spoke about in previous quarter, revenue there fell by 20% to RMB118 million. It was once again the segment that was most affected by the tightening policy, which we will explain in more detail in a moment. The change in business mix also led to a further shift in customer mix. Revenue from Ping An group rose 44% to RMB564 million mainly benefiting from the rollout of cloud services. At Lufax revenue fell 5.9% to RMB89.5 million. The demand for risk management solutions was strong; however, insurance of business originations, there was a talk as operating environment for Internet business has changed.

Third-party customers posted revenue growth of 9.4% to RMB340 million. We have made good progress in our optimization exercise cleaning out let's see low-value products. However, the party customers have gradually helped with recovery there. We had a strong quarter risk management as well, nevertheless operation support had a difficult quarter as asset monitoring product was affected by regulatory change. We do recognize that the overall revenue growth has been softer and in the past few months, we have further enhanced our sales management and the customer outreach with more emphasize such should be directed to premium class customers.

From the customers are those generating over RMB100,000 in revenue per year, however, the threshold now is too low. Premium class customers contribute over RMB1 million in revenue per year, the trend is a better reflection of our relationships with key financial institutions and this shift, we will allow us to drive the business forward in a more sustainable way.

We've achieved a good growth of both premium and premium plus customers in the first half, year-on-year the number of premium customers increased from 346 to 460 as of the June 30th. The number of premium class customers increased from 87 to 113. Moving on to the gross margin, year-over-year the metric decreased from 38.8% to 34.1% reflecting the change in mix of solutions. However, some of our new products in their early stage do tend to have lower profitability. Quarter-on-quarter, the metric was largely stable.

Next, I would like to discuss operating expenses; the three main expense items all reported a drop in revenue reaching. Let's look at them one by one. The research and development expenses rose 24% to RMB259 million as we continue to invest in innovation as new solutions such as cloud services platform. Even though some products are more mature, upgrade, and enhancement, also caught for, as a percentage of revenue, the research and development expenses ratio was lower year-over-year from 37.3% to 77.1%. In terms of sales and marketing, we spent less in the quarter. Expenses fell 24% year-on-year to RMB126 million. As a percentage of revenue, the reissue went down from 21.4% to 13%. Due to the regulatory tightening; we have less advertising and promotional activities for this quarter. In terms of general and administrative expenses, it posted a 9% increase to RMB211 million, as a percentage of revenue the ratio dropped from 25% to 21.8%.

We have been strengthening and at the same time streamlining our management, which helps some of the costs. The skills that we have been building also continues to improve operating leverage with more efficient resource allocation and the discipline, operating loss ratio improved from 46.6% to 40.9%. Net loss to shareholders rose slightly from RMB331 million to RMB349 million, as a percentage of revenue the net loss ratio improved by over 6.7 percentage points to 36.1% for the second quarter. It was a challenging quarter; this explains why we have to lower the full-year revenue guidance. We did factoring regulatory tightening in our annual budget, but the exchange of policy changed and the intensity of policy execution of both beyond our expectation, our team has been working hard to adjust our operations to address the policy environment and need to the involving needs of our customers.

Michael will elaborate more on how we have been addressing these challenges to ensure the continuous performance of our business. Michael, over to you.

Michael Fei -- Chief Executive Officer, SME Banking

Thank you. Now let me offer more color on how we have been adjusting our operations in response to external wings. Page 15, we have showed how these new operations affected our business, the new regulations many target you areas, namely the use of personal information under the geographical scope of regional banks. Regarding the use of personal information, new regulations prohibit the direct connection of personal data, but through Internet platform and the financial institutions. Internet platform crafting personal data are now required to obtain explicit approval from the users. As a result of this change, banks have to adjust their ways of approaching risk management to ensure compliance with the new regulations.

Regarding the geographic limitation, our regional banks, they can no longer accept the deposit from or offer room to client located in regions where they have no physical branches present, and also they cannot offer their term deposit product through a third party Internet platforms, these new rules affect new business development through online channels for these regional banks. With our transaction base, the revenue model, we have 3 major types of products affected by these new regulations, which are the Internet marketing related services and a smart marketing solution, the risk management service, smart risk management solution, and the asset monitoring service and the smart investment solution. Last year, these products have contributed the revenue over RMB500 million. We have been working on four different measures to mitigate the impact.

If you go to Page 16, you can see first of all we will help financial institutions to improve their sales management capabilities, to best support of their sales and a business development efforts, so that they will be less reliance for Internet platforms in customer acquisition. Second, we will help financial institution to enhance the management of their existing customer base to stimulate cross selling and up selling. Third, we will upgrade our offering in risk management to provide integrated solutions that offer system, product and models. Finally, we will further upgrade our offering of technology infrastructure product such as core banking system, AI, AI voice recognition, block chain and etcetera.

Let me give you some example; Page 17 is an example of our smart banker product at a small marketing solutions. Banks about this solution will be able to digitalize the whole sales management process and a significantly enhance the sales capability of their own coalition managers. The unique advantage of OneConnect is that we offer not only the technical tools, but also no help required to run a business. So that is the effect of these tools after maximized and the real impact will be delivered. We have shared one example in our Quarter One results announcement. At the end of the first half of this year, we have signed some of the company over 25,000 relationship managers. One of our clients have increased their average daily retail volume by 46% since adoption.

Next page is about another example of helping our kind to stimulate their existing customer base with our smart customer operation solution. Medibank have a large existing client base, the majority of this client are dormant or inactive. As new customer acquisition, it's becoming more and more difficult. The ability to explore existing customer base, it's becoming more importance. Our solution helps banks better understand the needs of these existing customers and find out the best approach to activate them. Once right, they prefer which communication channels they like, what would be the next product to buy etcetera. In one of the banks that have adopted our solution, the number of average daily active customer increased to 10 times. The number of daily wealth management inquiries increased to 30 times. And in the wealth management transaction volume increased to 20 times. Page 19 is an illustration of our all-around risk management service, instead of providing only credit data, we offer end-to-end risk management solution, including risk control tools, credit systems or event application tools. The solution is all-round in a net affair that it can support multiple home products on one platform, secured or unsecured, mortgage or car loans, consumer finance helping his loans. The solution to help costs, improve efficiency, cutting the long verification time required from 15 days to 3 days. New product launch time is also shortened from four months to one week.

Next is about our technology infrastructure product, so the past 3 years, we have been continuously investing on these technologies and launching new products, some such as a cloud or SmartVoice products have grown to contribute significant percentage of our growth, some is being incubated and have obtained initial success such as core banking, open platform, etcetera. We believe technology is key to our long-term competitiveness and we will continue to invest.

Page 21, again, we want to reiterate our value proposition, digital transformation for financial institutions.

Operator

Please stay with us for a moment, we are having some technical problems and will fix it out as soon as possible. Thank you.

Michael Fei -- Chief Executive Officer, SME Banking

So, can you hear me.

Operator

Okay Michael, we can hear you. Please go ahead, please. Thank you.

Michael Fei -- Chief Executive Officer, SME Banking

Okay, sorry. There is some technical problems. If we go back to page 21, let me restart with page again, we want to reiterate our value proposition, digital transformation for financial institution is a huge market and only starting. We are the leading solution provider in the market having served over 640 banks, 110 insurance companies and 120 plus clients in overseas markets. We are uniquely positioned as we offer not only system and tools, but also business know-how of how to better use the systems and tools to ensure a successful digital transformation. Although they are short-term headwinds as a result of tightening regulatory deployments, but we have anticipated these trends and proactively taken measures to upgrade our solutions.

The examples we have introduced just now are not developed out of nothing, they have been launched in the past 12 months with tested successful client cases. This is why we can continue to deliver growth over 30% in both revenue and network premium clients in the first half of this year, despite all these regulatory impact. And also, we are confident that in the medium to long-term as the market is becoming more regulated, OneConnect is best positioned to further strengthen our leading position.

Lastly, Page 32; in summary, we expect that the full-year revenue growth will be no less than the growth rate we achieved in the second quarter of this year. We also stick to our original targets to improve our net loss ratio by double digits. Finally, we will stick to our original strategy on growing premium customers and deepen our wallet share with these premium and the premium plus customers. We have achieved a good momentum in developing premium customer in the first half of this year and we aim to continue that moment in the second half.

I will pass it back to our Anita.

Anita YQ Du -- Investor Relation Manager

Thank you. Thank you, Michael. And sorry everyone for the technical issue. Operator, we are ready for the questions, please open the line.

Questions and Answers:

Operator

Okay. Thank you ma'am. [Operator Instructions] Please standby. While we compile the Q&A roster. And speakers, our first question from Hans Chung of KeyBanc. You may ask your question.

Hans Chung -- KeyBanc -- Analyst

Good morning. Thank you for taking my questions. So my first question is regarding regulatory changes and it's shown there, like are we comfortable with the regulation have been pretty much paid off the account and we just need to go through the changes in digi model from client side. And eventually, I think the pattern from that year-over-year growth perspective, which quarter should we think about the pattern and then and then second question is just I think since last quarter you guys mentioned a lot of the new products and that is encouraging and then just wonder when should we start to see the meaningful contribution from those new products and then the last question just kind of high level just digging the changes in regulation and then are we going to see like different, I would say the difference in basic model specifically actually just want to know whether we will consider like may be subscription-based business model versus transaction base, and that's all my question. Thank you.

Anita YQ Du -- Investor Relation Manager

Thank you, Hans. Thank you for your question. Michael, can you take the first and the third questions? And Wangchun, can you please take the second one. Thank you.

Michael Fei -- Chief Executive Officer, SME Banking

Yes. On the regulatory impact, we have just introduced I think the regulatory tightening is mainly focusing two areas, one is the utilization of customers' personal information and secondly is the geographic scope after big development for those regional banks and as we have stated just now, the impact will be mainly of three products. One is the Internet marketing services, the asset monitoring services and digital risk management services. The corresponding revenue for these products for the last year for 2020 was over RMB500 million. In the first half of the 2021, we see significant impact on the Internet marketing products and the asset monitoring products, and actually without these impacts, the overall revenue growth in the first half of this year will be over what we have achieved the last year and the third-party revenue growth will be more than 30%, so we anticipate these policy change, we'll continue to have impact on us for the second half of this year especially also on the Digital Risk Management products, that is why we actually have adjusted our revenue forecast, we believe the revised forecast has taken into accounts of the relative change we have seen and anticipated.

Ye Wangchun -- Chairman & Chief Executive Officer

For the second question, the revenue contribution of the new products have been affected in our results already, because as said we factored in our anticipation of the policy tightening in the beginning of the season already and we have started to through the product innovation and upgrade, just as Michael mentioned in his presentation, the examples of our new solutions has been proved to be successful in practice. I think if we didn't have the new products in place in the second half of the year, our revenue will be affected even more, we cannot see the goals reach we have so far, that's my answer. Thank you.

Michael Fei -- Chief Executive Officer, SME Banking

Know your third question about the transaction based revenue model. We know there will be a controversial whether we should go for a subscription-based on transaction-based revenue model. However, we still believe the transaction based revenue model and compare to the stat of our overall competitiveness and we have confidence in the long-term market potential for this type of model.

First of all, I think this is our core comparative advantage of combining technology and a business, which can give full refracts of our industry experience and business understanding. Secondly, we adopt this transaction fees of revenue model because the market of the digital transformation in China is still huge. We see there is a huge potential in the market, by allowing our revenue with the usage of volume we can enjoy great long-term growth potential. And thirdly, we still believe that in the promotion of staff service in Chinese financial institutions, the transaction volume based revenue model is the most acceptable model for our customers. Of course, given the policy headwind that we face, it did work that we may have better off this moment with the transaction based revenue model, but we are aware of these volatility in the performance.

And I think we will continue to review product by product and choose the best revenue model for each products.

Anita YQ Du -- Investor Relation Manager

Thank you, Michael and Wangchun, and thank you, Hans, for your questions. Operator, we can move to next question.

Operator

All right, thank you, ma'am. Our next question from Carson Lo of HSBC. Your line is open.

Carson Lo -- HSBC -- Analyst

Thank you management for taking my questions. My question is more on the cloud services. So, now cloud service has control around 27% of the total debt ratio this quarter. So, can management first question is can management update us on the progress on promoting or penetrating to cloud surface to third party customers beyond Ping An Group. And the second is we looked that there is new regulations on potential acquisitions on the registration of the financial cloud service provider, especially on the ASPs service provider that they need to debt financial institutions can only subscribe to the surface that are registered already and then the registration requirement for the ASPs services provider similarly relatively high, the requirement are relatively high, so can management elaborate a little bit on this front and then what is the impact to R&D on this transfer side [Phonetic]. Thank you.

Anita YQ Du -- Investor Relation Manager

Thank you, Carson. Thank you for your question. Michael, and our CEO of [indecipherable] will take your questions. Thank you.

Unidentified Participant

[Foreign Speech]

You just ask about the third party customer penetration for cloud service platform in the second quarter. We are happy to report that we've added newly added five third party customers in the second quarter. As of the end of the second quarter, overall, we have required 36 contracts in which is about RMB60 million in value. So, for the second half of the year, we will continue to focus on external expansion. The regulators to remain cautious on the financial cloud service model as these model is charging based on usage, therefore, for third party customers, the volume is still smaller compared with the volume we used by the Ping An Group that's explains the lower revenue contribution from the third-party customers and that's why we will focus more on external expansion and you also mentioned of our license and registration requirements from the regulators, we are now going through the process of security validation and we are among the first companies to carry out this process and we expect that in the second half of this year, we will have clear guidance from the regulators.

The regulatory registration is a two-step process. Firstly, we need to finish the security validation at a departmental level, which is expected to wrap up at the end of August and then after this process, we will continue the validation process at the central level. We explained that in the second half of this year we will finish the BCPC registration, Ping An is one of the first companies to finish this and at mid-September, we believe we will finish the registration for Internet financing and that we are also one of the first companies to complete that as well. For now we see that we are in complying with all the validation requirements, but the project has been completely finished, but we remain optimistic. We have finished the cloud instructor registration at the SEC and we are now qualified to provide services at regulated security institutions in China.

Thank you.

Anita YQ Du -- Investor Relation Manager

Thank you. Carson for your question. Operator, we can move to next question.

Operator

Sure ma'am. Our next question from Ethan Wang of CLSA. You may ask your question.

Ethan Wang -- CLSA -- Analyst

Thank you. Hi management, I have two questions, the first one is on cash, so you may just tell us [indecipherable] profit and cash balance. So do see the need to further raise cash as an issue [Phonetic]. And the second question is that COV chemicals [Phonetic] which we mentioned in the ROT [Phonetic], so under the new regulatory environment, do those still stay the same or is there any expensive to that. Thank you.

Anita YQ Du -- Investor Relation Manager

Thank you Ethan. Luo Yongtao will take your first question and Michael will take your second question. Thank you.

Luo Yongtao -- - Chief Financial Officer

Okay. The first one in terms of the cash, we have cash and equivalent on our boat about RMB1 billion at the end of the second quarter and plus we have short-term investment financial products about RMB2 billion. So, in total, we have our cash plus equivalent assets about the 3 billion and I think it's in very good position for our operation, so I think there is no need at end of the second quarter for any reason, any issue. If we have any further decisions, we will disclose our decision. Thank you.

Michael Fei -- Chief Executive Officer, SME Banking

Yes, on your second question, we will make committed that in the mid-term, we will have over 1,000 premium customers and it will be breakeven by the time that is our commitments and we will make committed to that.

Anita YQ Du -- Investor Relation Manager

Thank you. Operator, we can move to next question.

Operator

All right, thank you, ma'am. Your next question from Piyush Mubayi of Goldman Sachs. Your line is open.

Piyush Mubayi -- Goldman Sachs -- Analyst

Thank you for taking my question. Could you talk through a couple of areas. One is in the cloud business, what sort of gross margins are you running and what is the implication of the gross margin on the overall profitability of the business and the path to profitability that Michael just described and the second is on the international side, could you talk about where you are. Can you accelerate that further from where your business is positioned today and what is the sort of pace of acceleration we can see and then the third is with all of the changes we've seen on the regulatory front, if you could look at your business, in your, in your 25% growth, if you could just spell out how much of that slowdown is regulatory driven, and how much of it is otherwise in terms of what the change in guidance is for the year and how confident are you, my fourth question on that being able to do 25% overall growth rate for the second half of the year based on the guidance that you have given out. Thank you.

Anita YQ Du -- Investor Relation Manager

Thank you Piyush. Michael can you take the second question first, and then Wangchun will take your first question. Thank you.

Michael Fei -- Chief Executive Officer, SME Banking

Sorry, just to confirm what is the second question.

Anita YQ Du -- Investor Relation Manager

It's about the international business.

Michael Fei -- Chief Executive Officer, SME Banking

Yes, OK. The growth of the international business. Our international business, I think is a two parts, one is our business in the Southeast Asian market, the second is that virtual bank, the PAOB. Our business in Southeast Asian market is still very, very strong growth, much, much higher growth than what we have achieved in our domestic markets and we also have a very good customer signings for the first half of this year. But unfortunately, the percentage because they have a small base. So it is still a single digit percentage in terms of our total revenue contribution, but very, very quick, very healthy growth. Now, of course, there are some impacts due to COVID but I think we are working hard to increase our team in the South Asian market and increased also our product offering in the market. Another part of the business is our virtual bank, the PAOB, while here in Hong Kong, of course, I think you read all these news virtual bank in Hong Kong, they also published financial performance of all of these virtual banks.

I think our virtual bank, the PAOB, is unique that is focused on the SME lending. We see strong momentum of this SME loan growth and also so far as we have seen there is a no single overdue loans for ever since we launched the business. So we are quite confident about our asset quality, our risk measurement capability and also we are confident about our capability to improve our net interest margin.

Piyush Mubayi -- Goldman Sachs -- Analyst

Okay. Thank you Michael.

Ye Wangchun -- Chairman & Chief Executive Officer

Yes, I will take the first question on the gross margin, the gross margin dropped from last year's 38 to 34, I think the drop is due to the new products launches including the call services platform. Because all these products are in their early stage and we have to have more input or expenses to accelerate the revenue of the product. Overall, because you know the competitiveness of the cloud business is a very intensive, so the gross margin is not as high as our other products. But, I think with move on, we had our products more and more mature, the profitability will go up gradually. Thank you.

Piyush Mubayi -- Goldman Sachs -- Analyst

Does the gross margin improvement come from the mix change or just from cloud becoming more, higher gross margin business with time.

Unidentified Speaker

The high margin products for example like the risk management, our auto insurance claim solutions.

Piyush Mubayi -- Goldman Sachs -- Analyst

I think with the mix of change.

Anita YQ Du -- Investor Relation Manager

Thank you, Piyush. Operator.

Michael Fei -- Chief Executive Officer, SME Banking

I think there still question about the growth, I think Piyush asked about the impact of our 25% growth in the second quarter. I think as I mentioned earlier, there are three major products that are impacted by the new regulation change, the Internet marketing related services, asset monitoring services, and the risk data services, and the total rounded off these five products in last year 2020, was hardly RMB500 million and for the first half of this year, the impact was mainly on the first two, that was the Internet marketing services and asset monitoring services. We have a decline of RMB170 million revenue for the first half of this year as a result of these two products, so if you're taking out of the impact of these two products, our revenue growth for the first half was actually higher than what we have achieved. It was also higher than what we have committed earlier this year. And the bookings in the third and fourth quarter, based on our current as a standing of the regulatory change, we're working a bigger impact on the third product. I just mentioned that is a quite a biggest data services.

So, that is why we have decided to adjust down the forecast for the full year. Except for these three products, the other product actually growing quite good as you can see either our risk management, operations, as well as the cloud services we have seen very good momentum there very good growth. That is also gives us confidence, our full year growth momentum.

Anita YQ Du -- Investor Relation Manager

Thank you, Piyush for your question. Operator, we will take our last question. Thank you.

Operator

Thank you, ma'am. Our last question from Alex Yao of JPMorgan. You may ask your question.

Alex Yao -- JPMorgan -- Analyst

Thank you management for taking my question. A couple of heart touching questions; number one, does the cloud modern structure different between [Phonetic] revenue source and a [Phonetic] revenue source. And then secondly, in terms of non-cloud revenue or OTCE development, what are the key area of future revenue potential from industry perspective, is it more on the banking side, more security, more for example firms, industry. Thank you.

Anita YQ Du -- Investor Relation Manager

Thank you Alex for your questions. Michael will take both of your questions.

Michael Fei -- Chief Executive Officer, SME Banking

Yes, on the margin structure for Ping An and non-Ping An, they're actually quite similar because we have to have an up-branch [Phonetic] relationship with all of the Ping An transactions. So we have to have this market-oriented pricing for Ping An and non-Ping An customers. Yes. Of course there will be in scale impact because the Ping An is a much larger customer, they have a much larger transaction volume, so you on average, I think per transaction basis, the Ping An [Phonetic] have a better margin compared with those for private client who is still in the initial stage are relatively small in terms of transaction volume. And on your question about the growth potential, we believe banking still be the largest potential area for cloud services because the banking has over 70% to 80% of the total assets of the China financial industry, so banks will be the largest growth area opportunity area for cloud services.

Anita YQ Du -- Investor Relation Manager

Thank you, Michael. I think that sums up our earnings call today. Thank you everyone for joining the call today. We look forward to speaking with you again. Thank you.

Operator

[Operator Closing Remarks]

Duration: 57 minutes

Call participants:

Anita YQ Du -- Investor Relation Manager

Ye Wangchun -- Chairman & Chief Executive Officer

Luo Yongtao -- - Chief Financial Officer

Michael Fei -- Chief Executive Officer, SME Banking

Unidentified Speaker

Hans Chung -- KeyBanc -- Analyst

Carson Lo -- HSBC -- Analyst

Unidentified Participant

Ethan Wang -- CLSA -- Analyst

Piyush Mubayi -- Goldman Sachs -- Analyst

Alex Yao -- JPMorgan -- Analyst

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