The financial technology or “fintech” revolution is a globally expansive phenomenon. While many Western countries were the first to adapt to a more technical form of financial service delivery, other nations are also quickly embracing this revolution. China is one such nation, and it serves as a strong example as to how fintech on a large scale can benefit an economy.
What is Fintech?
Fintech can be defined as a term used to describe any technology related to the management of finances and its associated activities. Fintech boasts a wide range of products and services spanning from those that provide digital services such as mobile payments, credit and loan services, crowdfunding solutions, to more advanced forms of investment solutions and wealth management solutions.
The Rise of Fintech in China
China is a nation that is quickly recognizing the potentials of fintech and taking the necessary steps to leverage the ever-growing digital landscape. This is evidenced by its rapid adoption and integration of various digital channels into their financial network.
As a thriving economy, China plays an integral role in global financial markets. According to The Economist, in 2018, China contributed nearly one-third of the world’s GDP growth and accounted for more than 18% of all global payments.
As of August 2019, China hosts the world’s second-largest financial system with more than $40 trillion in assets under management. With the growing fame and customer preference for mobile payments, e-commerce, and other more advanced fintech offerings like peer-to-peer lending and robo-advisory services, China is primed to become a major force in the global financial technological revolution.
Growth of Fintech Startups
The fact that fintech presents a huge growth take-off in the Chinese economy has not gone unnoticed by foreign investors. Today, China is home to hundreds of digital payment companies and financial services startups, providing everything from digital wallets and lending to credit scoring and global payments.
These startups have grown on the back of Chinese tech and internet titans such as Alibaba and Tencent, who invested heavily in these services and partnered up with banks to facilitate their service delivery. Additionally, venture capital firms have identified the potential in this industry and have pumped billions of dollars into it.
Major Chinese Economic Disruption
Chinese technology giants have also brought about another major disruption in the economy. By fully integrating financial and technology capabilities, these companies are able to leverage their unique assets to provide mobility to their customers, which isn’t just limited to money but also extends to data and services. This disruption has enabled Chinese citizens greater access and control over their finances, as well as improved customer relations and experiences,leading to more trust and loyalty towards these companies.
The Development of the Regulatory Framework
As with any burgeoning industry, regulatory bodies have been created to ensure that the services and products offered in the fintech space are secure and compliant. The People’s Bank of China (PBOC) is the regulatory body established to oversee the development of fintech operations in the country. The PBOC provides a friendly and permissive environment for startups to launch their business and also ensures that they comply with certain standards.
Furthermore, the PBOC has established an online platform to provide a one-stop shop for all fintech services. This platform enables Chinese investors to buy and invest in a range of digital assets, such as cryptocurrencies, peer-to-peer lending, asset-backed securities and online insurance.
The fintech revolution is well on its way to becoming a major player in the future of global finance. China is currently leaps and bounds ahead of the Western world in terms of fintech adoption and its efforts will likely ensure its success in the long term. With its infrastructure, regulatory framework and investments into this industry, the possibilities for growth are seemingly endless. Furthermore, with more and more citizens integrating digital financial services into their daily lives, it is likely that China will remain a pioneer in this space for many more years to come.
