OneConnect: Navigating High-Risk Restructuring for Long-Term Fintech Dominance

In the rapidly evolving fintech sector, companies must balance innovation with financial sustainability to thrive. OneConnect Financial Technology (NYSE: OCFT) has embarked on a high-stakes transformation, phasing out legacy revenue streams while doubling down on AI-driven solutions and international expansion. This article evaluates whether the company’s aggressive restructuring—marked by a high-burn, pre-profit model—can position it for long-term dominance in a competitive global market.

Financial Challenges and Strategic Shifts

OneConnect’s 2024 and 2025 financial results underscore the risks of its transformation. By Q3 2024, the company reported a 48.3% year-over-year revenue decline to RMB417 million, driven by the near-total elimination of its cloud service business, which fell 99.6% to RMB2 million [2]. Despite a 41.9% improvement in net losses from continuing operations (RMB30 million vs. RMB51 million in 2023), the company’s cash burn remains alarming. By Q2 2025, net cash used in operating activities reached RMB210 million, with R&D expenses slashed by 71% to RMB117 million [3]. These cuts reflect a strategic pivot toward cost optimization but raise concerns about long-term innovation capacity.

The company’s valuation further highlights its precarious position. With a market capitalization of $2.71 billion and a Price/Book ratio of 0.23 in Q2 2025 [2], OneConnect is undervalued relative to peers, suggesting investor skepticism about near-term profitability. However, its focus on breakeven goals and digital transformation in Southeast Asia and the Middle East signals a long-term vision.

AI-Driven Differentiation and Competitive Positioning

OneConnect’s strategic transformation hinges on AI-driven differentiation. The company has shifted resources to develop advanced applications such as real-time fraud detection, agentic risk engines, and generative AI for compliance [1]. These tools aim to automate complex financial tasks, from dynamic portfolio rebalancing to real-time trade execution, positioning OneConnect as a leader in algorithmic trading and risk management.

The company’s Gamma Platform and “business + technology” model further distinguish it. By integrating AI into digital banking, insurance, and investment solutions, OneConnect offers end-to-end services tailored to small and medium-sized financial institutions [1]. For instance, its AI-powered eKYC and deepfake detection systems support secure remote account opening, addressing critical pain points in regulatory compliance [1].

Competitively, OneConnect faces giants like Cognizant and Accenture but differentiates itself through deep fintech expertise and a focus on AI. Its international expansion—serving 214 clients across 20 countries—has driven 23.4% year-on-year growth in overseas revenue [2]. Partnerships, such as its collaboration with CIMB Philippines and a Vietnamese transportation group, underscore its ability to adapt solutions to regional markets [1].

Monetization and Scalability: A High-Burn Dilemma

Monetizing AI initiatives remains a challenge. While OneConnect has developed over 12 AI-powered applications—used by 50% of Hong Kong’s retail banks for fraud prevention [1]—revenue from these products is not explicitly detailed in recent reports. The company’s Q3 2024 results show a 11.2% growth in Digital Insurance, hinting at potential, but overall revenue declines persist [2].

The high-burn model raises questions about scalability. SoftBank’s Vision Fund, a cautionary tale in high-risk AI investments, illustrates the perils of overreliance on speculative growth [2]. OneConnect’s reduced R&D spending (from RMB230 million to RMB70 million) suggests a focus on cost control, but this could stifle innovation if not balanced with strategic R&D [2].

Long-Term Viability: Risks and Opportunities

OneConnect’s success depends on executing its strategic priorities:
1. Sustainable Cost Optimization: Further reducing operating losses while maintaining R&D for AI innovation.
2. International Scalability: Expanding its 20-country footprint to capture emerging markets, where digital banking adoption is surging.
3. AI Monetization: Converting its AI tools into recurring revenue streams, such as SaaS subscriptions for fraud detection or compliance.

However, risks persist. The fintech sector is highly competitive, with rivals like Tata Consultancy Services and Cognizant offering similar AI-driven services. Additionally, regulatory scrutiny of AI in finance could delay product launches or increase compliance costs.

Conclusion: A High-Risk Bet on AI’s Future

OneConnect’s restructuring is a high-stakes gamble. While its financials remain volatile, the company’s AI-driven differentiation and international expansion offer a compelling long-term thesis. If it can scale its AI solutions into profitable, recurring revenue streams and maintain cost discipline, OneConnect could emerge as a fintech leader. However, investors must weigh the risks of its high-burn model against the potential for transformative growth in a sector where AI is reshaping the competitive landscape.

Source:
[1] OneConnect Named to IDC China FinTech Emerging 50 [https://www.prnewswire.com/apac/news-releases/oneconnect-named-to-idc-china-fintech-emerging-50-for-sixth-consecutive-year-302537564.html]
[2] Earnings call: OneConnect reports improved financials ... [https://www.investing.com/news/transcripts/earnings-call-oneconnect-reports-improved-financials-amid-strategic-shifts-93CH-3724036]
[3] OneConnect Financial Earnings Q2 2025 - OCFT [https://www.panabee.com/news/oneconnect-financial-earnings-q2-2025]