Fintech booming in China and HK despite looming trade war

ALTHOUGH US President Donald Trump pushed back the deadline for raising tariffs on Chinese goods, the trade war is a cause for concern among investors and local businesses in China.

However, recent data by CB Insights suggests otherwise — especially in the fintech space.

Global investment in fintech ventures more than doubled in 2018, to US$55.3 billion, led by a surge in funding in China and strong gains in several other markets as investors placed larger bets in more mature startups.

The tremendous growth was due in large part to a ninefold increase in the value of deals in China, to US$25.5 billion — nearly as much as the US$26.7 billion from all fintech investments globally in 2017.

China accounted for 46 percent of all fintech investments in 2018. More than half of China’s fintech investment came from the record US$14 billion funding round in May of Ant Financial, which manages the world’s largest money market fund but is perhaps best known for its Alipay mobile payments service.

The single Ant Financial fundraising, which Accenture categorized under wealth and asset management, makes up the vast majority of all funding for that category, catapulting investment into wealth and asset management startups to lead position, with 30 percent of total investments globally.

Payment startups accounted for 23 percent of the fintech financing, and those in lending accounted for 19 percent.

After Ant Financial, the next-largest fundraiser was China’s Du Xiaoman Financial — spun off from Chinese search engine giant Baidu in April — which raised US$4.3 billion in two separate transactions to bolster its consumer finance business and strengthen cooperation with domestic lenders.

Another large transaction in China included the US$1.3 billion that wealth management platform Lufax raised in December after postponing plans for a Hong Kong IPO.

Hong Kong is a fintech winner too

Although fundraising was down 65.6 percent in Hong Kong, with startups there raising only US$188 million, compared to US$546 million in 2017, the number of deals actually went up to 19 from 15 (a 27 percent increase year on year).

“Focusing only on the fundraising figures can be deceiving, as they don’t tell the whole picture,” explained Accenture MD Ravinder Chhabra.

“The number of deals picked up considerably, which is a sign of a maturing market because it shows investors are more comfortable in looking at different fintech segments and diversifying the types of startups they invest, not just betting solely on big, established technology players in later rounds.”

Further, in 2017, the various Hong Kong regulators unveiled several new measures that helped to lay the groundwork for further development of the city’s fintech ecosystem last year and Hong Kong’s appeal as a global fintech hub and investment magnet.

“So, it was a bit of a wait and see period last year to monitor the implication of some of these regulations and new initiatives.”

With the new faster payments system in place, the first digital insurer unveiled and new virtual banking licenses about to be announced, the expectations are for 2019 to be another exciting and breakthrough year for fintechs in Hong Kong.

“Considering how quickly both digital insurers and virtual banks have to move once they’re granted their licenses, there should be a considerable amount of activity in those two areas for sure, after a breakthrough year for insurtechs in particular in 2018.”

Overall, the past year has been great for both China and Hong Kong — and experts believe things aren’t about to slow down for either of the two countries keen on pursuing more victories in the fintech space.

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