China’s fintech clampdown after Ant’s IPO suspension is positive, says Ping An CIO

Senior Reporter Eudora Wang & Jonathan Larsen, Chief Innovation Officer, Ping An Insurance Group & CEO, Global Voyager Fund

China’s increased regulatory scrutiny of the fintech sector following the suspension of Ant Group’s mega IPO is a positive for the country, according to Ping An Insurance’s top executive.

There is a general desire to establish common standards of regulatory supervision to ensure protection in the financial sector, said Jonathan Larsen, chief innovation officer at Ping An Insurance.

He was speaking at DealStreetAsia’s Asia PE-VC Summit 2020 at the session titled ‘Is the Growth Spurt in Fintech and Digital Health Sectors Here to Stay.’

“I think that’s probably a positive thing for China,” he said while highlighting the regulatory landscape of the world’s most populous country.

Responding to a question on the impact of the suspension of Ant Group’s dual listing on other fintech players in the country, Larsen said having a two-track or two-tier financial system has created “issues.” In fact, it’s something regulators are concerned about – they have publicly raised the systemic risks associated with it, he added.

“We’ve seen the whole clean-up of the P2P (peer-to-peer lending) industry….we’re witnessing right now a fundamental transition from a kind of guaranteed fixed yield effective market to a properly marketised and NAV-driven market,” said Larsen.

China’s abrupt suspension of Ant Group’s record $37-billion listing two days before trading has sent shock waves to companies across the fintech sector. Experts and analysts opined Ant’s IPO’s suspension could signal what is the beginning of regulators’ seeking a level-playing field between fintech operators and traditional banks. The dramatic suspension of Alibaba-owned company’s IPO, which was touted to be the world’s biggest, has put the entire fintech sector into the spotlight.

China’s financial authorities emphasised the need to regulate financial technology, days after the suspension.

Larsen said the fintech sector is very important to Ping An, adding how China’s largest insurer by market value has been a pioneer in using technology in a transformative way – it has applied technology to its traditional businesses and life insurance and consumer banking. “And in all of those businesses, we have a meaningful scale,” he said.

The Chinese insurance giant’s fintech arm OneConnect was listed on the New York Stock Exchange (NYSE) last year. It also listed Lufax Holdings, a fintech firm that offers wealth management and retail lending services, on NYSE last month.

Larsen sees OneConnect’s business as “having an enormous runway into the future” as the fintech firm is offering its platforms, technology and products not only to Ping An but also to over 600 banks and ‘several thousand’ non-bank financial institutions, including most insurance companies in China.

“What the value proposition there is that many of these companies just don’t have the technical expertise or the scale of technology operations to be able to compete with the big tech giants. And they then, therefore, look to someone like Ping An to be a supplier of technology services and platform services. And we see that business having an enormous runway into the future,” he said.

On the geopolitical tensions between the US and China, Larsen said a host of Chinese fintech firms are still aiming to list in the US as the market offers the deepest capital in the world for investors.

Asked on the proposition of big tech firms in China expanding in emerging markets in Southeast Asia, he said, “I think there’ll be a focus on making sure that any expansion from financial companies is done in a prudent way. I say for Ping An.”

In general, the company’s strategy has been to export “our know-how and our technology, rather than making heavy asset commitments outside China. So what we are trying to do is very capital efficient,” he said, citing the example of OneConnect’s expansion into Southeast Asia.

Since the setting up of its regional headquarters in Singapore in 2018, OneConnect has more than 50 clients across Southeast Asia and other parts of Asia, as well as the UAE and Europe. It recently announced the launch of its new entity, OneConnect Smart Technology (Malaysia), in line with its Southeast Asia expansion strategy.

“And in just two years, I think we’ve made tremendous progress, and have built positions across quite a wide variety of financial institutions in the banking and insurance sectors, across most of the countries in the region,” said Larsen.

Back in home country China,  OneConnect had served all major banks, 99% of its city commercial banks, and 53% of its insurance companies, as of June 30, 2020.

RCEP signed, but Southeast Asia is not ‘United States of Asia’

While Larsen thinks the world’s largest free trade pact Regional Comprehensive Economic Partnership (RCEP)  is likely to be positive for the economy of participating countries, it is unlikely to change the reality of Southeast Asia, where each country is different in terms of political, regulatory, financial systems and competitive landscapes.

“It’s tempting to think of Southeast Asia as a kind of a United States of Asia in some ways. It is not. It’s a series of quite different individual markets, ranging dramatically in size, but also with very different political, regulatory, financial systems and competitive landscapes,” he said. “So each one needs to be dealt with originality, individually.”

RCEP, which was signed in November, groups the 10-member Association of Southeast Asian Nations (ASEAN), China, Japan, South Korea, Australia and New Zealand. It aims to progressively lower tariffs and promote trade between participating countries.

He also noted that there are very few examples of pan-regional platforms, even in the internet economy in Southeast Asia.

“So it’s not an easy place to operate if you want to spend the region with a single platform type of model. You know, I think there are some really interesting markets, we continue to be interested in Indonesia, having spent a fair bit of time in different contexts working in and with Indonesia,” he added.

“In the lending sector, the SME sector, the payment sector, there’s a lot of interesting things going on,” he said. “We continue to monitor Indonesia, we are yet to find an investment opportunity that we’ve wanted to progress with.”

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.