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Why OneConnect Financial Technology Soared Today

By Billy Duberstein – Nov 24, 2021 at 1:19PM

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The Chinese fintech released an upgrade to its tech platform for banks and insurance companies.

What happened

Shares of OneConnect Financial Technology (OCFT 2.93%) were soaring today, up by roughly 11% as of 11:34 am ET.

Of course, the fact that the Chinese fintech platform is down by a stunning 88% over the past year might have had something to do with it. Still, there was a positive catalyst today: The company announced a new upgraded fintech platform called Gamma Core.  

Person watching rising stock chart on phone.

Image source: Getty Images.

So what

OneConnect has been rolling out several products over the years to help Chinese banks and financial institutions digitize their operations, including customer acquisition, underwriting, and cloud services. But Gamma Core represents a single unified platform that allows financial institutions to digitize from top to bottom.

Gamma is built on a concept of the three "ones." The first is the concept of one underlying technology architecture for different types of customers. Customers are grouped into digital clusters called Digital Service Units, which differentiate customer segments under one common architecture.

The second "one" refers to a lower cost per customer, as the underlying Gamma technology architecture uses low-cost servers and flexible resource allocation that will greatly reduce costs and streamline data center efficiency.

Finally, the third -- and perhaps the most important -- refers to just 1 percent of all customer interactions requiring human interaction. This speaks to OneConnect's artificial intelligence capabilities, which enable automated data-driven decisions, from customer service to underwriting to market. Less human intervention means happier customers and lower costs. 

Now what

I had previously been high on OneConnect, as the digitization of China's financial institutions seemed like it had a long runway for growth; however, I got out of the stock amid this spring and summer's regulatory crackdown. In truth, OneConnect's growth has been a bit lower than I had expected even prior to the crackdown, and the company still makes hefty losses, with operating margins of negative 26.6% last quarter.

However, the new platform could be the start of a rebound. OneConnect's market cap has fallen to just $1 billion, less than two times sales, which seems like a small valuation for a company leading the digitization of finance in the world's biggest economy. It's not for the faint of heart, but for the aggressive risk-on investor, OneConnect may be worth a look on turnaround hopes as it launches the upgraded Gamma platform.

Billy Duberstein has no position in any of the stocks mentioned. His clients may own shares of the companies mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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