Fintech News

Is China Becoming the Leading Fintech Country in the World?

There has been competition by major global financial and innovation centres to become the world’s fintech hubs. China has made considerable progress to leapfrog the hitherto fintech cities of New York, London and Silicon Valley. Some people have referred to clusters of Chinese cities such as the Pearl River Delta as the “New Silicon Valley.” Although this comparison may not be really accurate, it is not completely unfounded to say that china could become the leading fintech country in the world.

China’s unique fintech ecosystem is characterized by multiple financial and innovation hubs offering different but complementary value to the fintech ecosystem. For instance, Beijing has the largest number of startups and VCs in the country, Shanghai is the country’s financial hub, Hangzhou is home to Alibaba, and Shenzhen is home to Tencent. There are some factors that explain why the fintech ecosystem in China has experienced faster growth than elsewhere.

Underserved Population

The major banks in China including BOC, ICBC, CCB and ABC are state owned. These banks focus on lending to other large state owned enterprises leaving small and medium sized enterprises without access to credit. Tech giants like Alibaba, Tencent and Baidu stepped in to serve this section of the market.

Internet Connectivity

The high number of internet users in China has played a key role in the development of the Fintech sector in the country. There are more than 700 million internet users in the country who have a propensity for smartphone and mobile payments. It is notable that Chinese have higher fintech adoption rates than most other countries. For instance, over 40 percent of consumers in the country use non-traditional payments systems like Alipay compared to only four percent in Singapore. This trend is replicated in other fintech areas of wealth management, lending and insurtech.

Active E-commerce Sector

China has major ecommerce platforms such as Taoball, Tmall and which have necessitated quick and easy e-payments. This has also created opportunities in other fintech verticals such as wealth management, investment, lending and insurance.  Fintech applications like Alipay have come in to fill the gap. Progressive financial institutions have also responded by launching their own fintech and digital platforms. On their part, banks are making use of user and merchant information available from the ecommerce providers to target traditionally underserved customers.

Adoption of Blockchain Technology

Traditionally, blockchain in China was only discussed by academics in research institutions; a trend that has since changed. Blockchain alliances and consortiums such as the Qianhai International Blockchain Ecosphere Alliance, the China Ledger Alliance and Financial Blockchain Shenzhen Consortium have emerged to spearhead the industry’s best practices. Additionally, there has emerged new blockchain and cryptocurrency players like Bitshares and NEO who are turning heads in the crypto-world.

Significantly, Chinese mining pools control more than 70 percent of bitcoin network’s hashrate with mining farms taking advantage of cheap electricity in the country.

Angela Scott-Briggs

Editor, | Interested in Innovations in Business, Finance, and Technology .

Published by
Angela Scott-Briggs

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