China leapfrogs UK, US to become undisputed global fintech hub

REUTERS/Aly Song

With fintech investments in China surging to $8.8 billion between July 2015 to June 2016 and a huge appetite of the domestic economy (GDP $10.9 trillion in 2015), China has leapfrogged ahead to become the undisputed global fintech hub.

China’s fintech industry is leading by huge margins in Asia-Pacific with segments like payments and insurance already beyond the tipping point with non-banks commanding an impressive 35 per cent or higher market share within the span of two years, according to a report released on Monday by DBS and EY — The Rise of FinTech in China.

The speed at which China’s fintech landscape has developed is truly remarkable and it has got this far because China’s landscape has operated in a sandbox-like environment conducive for fintech to thrive, said DBS Chief Innovation Officer Neal Cross in the report.

He added that much of this can be attributed to the favorable government policies and regulations, something most of the global fintech players had been noticing in recent years.

“While the country hasn’t received the attention and acclaim of its counterparts in the fintech arena, its champions are blowing away competition all over the world. It’s only recently that we are starting to see China’s leading fintech companies take center stage at the global level,” he added.

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Traditionally, UK and the US have jostled to be recognized as leading global fintech centers. However, as banks and financial services institutions in the west look at ways to incrementally innovate, China’s technology leaders are revolutionizing many aspects of financial services.

With a GDP already almost equating to the aggregate of the next 10-largest emerging markets, China’s economic growth continues to outpace almost all other countries.

Moreover, under-served by China’s incumbent banking system, consumers and small- to medium-sized enterprises (SMEs) are increasingly turning to alternative providers for access to payments, credit, investments, insurance and even other non-financial service offerings.

“These developments are also worth considering relative to other markets. For consumers and SMEs at least, it is in developing markets where FinTech will likely have the greatest impact,” according to EY Asia-Pacific FinTech Leader James Lloyd.

For instance, 40 per cent of Chinese consumers use new payments methods compared with 4 per cent in Singapore, while 35 per cent use FinTech to access insurance products compared with 1–2 per cent in many Southeast Asian markets.

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Among the first movers in China include Ping An, which leads digital insurance in China in partnership with Alibaba and Tencent, alongside Alipay, Tenpay and UnionPay for payments and remittances.

Unsurprisingly then, China has 8 of the 27 current FinTech “unicorns” – technology companies that investors value at more than $1 billion.

The report noted that in the coming years, China looks set to continue to dominate the global fintech industry with a very strong domestic market. Internally, the push and pull factors are clearly in place to catalyse the establishment of a leading digital finance sector.

On the push side, capital investment is pouring in and the market is being bolstered by substantial government support for innovation. On the pull side, demand is being driven by under-served SMEs and tech-savvy, often unbanked, consumers keen to access financial services via their mobile phones.

In fact, overseas, Chinese fintech firms will also play an increasingly important role in the global collaborations driving technological innovation. What these companies learn abroad, they will bring back to the domestic market, further fueling the sector to stay ahead of the rest of the world.

Also Read:

China’s 51 Credit bags $84m series C+ round to build fintech investment fund

Fintech startups get top valuations among China’s unicorns

China: Baidu makes strategic investment in US fintech firm Zestfinance

Digest: IE Singapore signs infrastructure MOU with China, MAS to experiment with fintech, Singapore bond market distorts credit costs

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.