Conduent

Xinhuatong

BNN Technology holds a 10% stake in its strategic partner Xinhuatong, a software development company with exclusive rights for payment processing and other key services on the Xinhua News mobile app. Mr Dong Jinhua, a director of the Company, is also founder and CEO of Xinhuatong.

This major partnership allows BNN to take advantage of the continuing growth in the Chinese smartphone user market and the rapidly growing mobile payments market. This is demonstrated by the increase in the China smartphone market, which is forecast to increase from 785 million users in 2015 to nearly 1 billion users in 2016¹, and the fact that Chinese mobile-payment transactions doubled last year to USD235bn2.

This important collaboration gives BNN the opportunity to provide the technology to Xinhuatong to facilitate mobile payments on the Xinhua News mobile app in up to 12 provinces with a total population of approximately 700 million people. The deal will allow the Group to generate commission revenues initially from the payment of parking fines, utility bills and mobile top-ups.

The partnership has significant potential for enhancing long-term shareholder value at BNN Technology. Xinhuatong is in the process of applying for a national payment processing licence. If successful this gives Xinhuatong, and its partners, greater access to the rapidly growing mobile payments market in China worth USD235bn3 in 2015, more than double the previous year’s figure and expected to see significant growth over the coming years With BNN providing the technology platform to Xinhuatong through NewNet, it potentially gives the company a foothold in another sizeable part of the Chinese payments value chain.

If the licence application is successful, which would not be likely until 2017, as the technology platform provider it will increase BNNs share of wallet in a bigger and higher margin part of the payments market. It is expected that it would also multiply the commission received on any new future payment services. In addition, Xinhuatong has strong commercial relationships in further consumer-facing service sectors attractive to BNN’s technology, not least the retail insurance industry.

Separately, BNN’s transfer of lottery assets during 2016 into Xinhuacai, its 49% owned joint venture with Xinhuatong, will enable the enlarged business to be better positioned in the lottery market as it awaits new regulation and seeks new opportunities. BNN remains the technology, sports content and game content provider to Xinhuacai.

  • 1Source: IDC, MIIT, JP Morgan estimates August 2016
  • 2Source: Red Pulse China Market Intelligence August 2016
  • 3Source: Red Pulse 18th August 2016. Market size as at year end 2015

GDP in China's largest provinces (RMB Billion)

GDP in China's largest provinces (RMB Billion)

Source: data.stats.gov.cn 2015


Smartphone penetration among mobile users in China

China third-party mobile payment GMB

Source: eMarketer Statista 2016 | Additional Information China eMarketer, July 2015

We expect:

An Increase From

785

Million Smartphone Users in 2015

to

ONE

Billion Users in 2016