Is China becoming the world’s fintech capital?
CHINESE fintech investment is robust – topping US$6.4 billion last year – according to a new report by management consulting firm Oliver Wyman titled ‘Fintech in China’.
The boom in investment reflects an underserved market demand, mostly to consumers, as well as continued challenges in the financial services sector.
According to the report, which explores the underlying value drivers of the fintech industry in China, the year 2013 is widely recognised as the start of the investment boom in fintech.
However, China has struggled in technological innovation and been regarded as a follower of the developed economies.
Yet, when it comes to fintech, “China could claim to be a world leader in some respects, with the potential to shape the global fintech landscape,” the report adds.
For example, it took four years for peer-to-peer transaction volume to exceed US$5 billion in the United States, while it took only two years in China. Furthermore, the large increase in investment, at a CAGR of 300 percent between 2013 and 2016, was huge relative to the CAGR in the US in the same period, which stood at 42 percent.
This is because the country contributes to some of the world’s largest investments in the sector, and has been adopting technologies faster than anywhere else. The likes of Alipay, Lufax and ZhongAn Insurance have made their names across the globe by developing some of the most disruptive business models.
However, the report states that the world has not yet seen the full potential of fintech in China.
“We believe that technological advances, coupled with the unique circumstances of China’s financial system, will propel fintech companies to further drive innovation and disrupt the traditional financial services space,” it adds.
As Premier Li Keqiang commented at the inauguration ceremony of WeBank, the new web-based bank owned by Tencent, “It’s one small step for WeBank, one giant step for the country’s financial reform.”
Globally, fintech investments hit over US$8 billion in Q2 this year, up from US$3 billion in Q1 2017, according to a KPMG study, with North America and Europe holding the largest stakes in the total market.