With the global Fintech investment from the first half of 2018 surpassing the entirety of 2017 by almost 20% (see below) Financial Technology is well on its way to positioning itself as the industrial zeitgeist of 21st century. In this article we will run you through China’s role in the Fintech industry before publishing a comparison between Europe, USA and China next week.



A major player in the FinTech investment market continues  to be China, with Ant Financials´ US$14B Q2’18 raise setting a record. In addition to this, China saw four other $100 million+ ‘megarounds’ in the Fintech industry.



Dark(ish) Horse

Although many of you may have heard of Alibaba or Baidu, the likelihood is that the vast majority of our readers are not well informed when it comes to the Chinese market. The reason for this is the Chinese so called “techno-nationalism” whereby the government has built “the great firewall of China” as it is often called, to not only restrict the flow of information, but also to ensure a certain amount of protection for Chinese firms from foreign competition.

So how has the Chinese Fintech ecosystem flourished so quickly?

Connectivity & Ecommerce/Mobile Payments

China has over 700 million internet users which equates to more than double the entire US population, if one takes this figure into account, it is no surprise that the Chinese population has developed a propensity to use mobile phones to make payments. Below we have a graph from the Financial Times showing the vast difference between mobile transactions in the US and China. The percentage of the Chinese population who prefer using non-traditional payments (mobile transactions) stands at 40%, in comparison to the US where the figure is approximately  14.8%.


Above– An analysis from EY whereby 20 major economies were studied. The findings, as illustrated above, show that “China comes out on top, where it’s fair to say there’s a large digitally-savvy, but financially underserved population,” (Thomas Bull, leader of the EY FinTech Adoption Index)


The volume of Chinese mobile payments is colossal. The emergence of apps such as WeChat (Weixin) Pay or Alipay (Zhifubao) which offer the integration of both social networking and payments, has allowed the Fintech industry to thrive. Taken from an article written by Wharton Dean, Geoffrey Garrett, the passage below provides insight into the world of mobile payments in China:

“This new world was brought home to me at a breakfast I attended a few months ago in Shanghai. It was the birthday of someone at the table. To celebrate, someone wanted to send “red packets” (hongbao) to everyone at the breakfast. This is an age-old Chinese tradition — stuffing different amounts of cash into red envelopes to celebrate a special occasion, with the surprise of seeing what you got.

Of course, there were no (physical) red packets on the breakfast table. Only a lot of smartphones, all with the red packets app on WeChat. Apparently, my breakfast companions were not alone. Last Chinese New Year, 14 billion digital red packets were gifted through WeChat — 10 packets for every one of the 1.4 billion people living in China.

And then someone at the table turned the red packet into gold — by using their red packet bounty to buy gold (probably no more than .01 of an ounce), on another WeChat app. I really don’t know how the gold transaction worked, but if there is a way to trade gold on your phone in the U.S. I certainly haven’t been able to find it.

Then there is the rise of quasi-banking in China — all based on the fact that people deposit money on their phones to pay for stuff. Here the leader is Alibaba’s Yu’e Bao (“leftover treasure”), a money market fund with 370 million account holders and $211 billion in assets, with 100% growth in the past year. It is now the largest money market fund in the world according to Morningstar. By contrast, J.P. Morgan Asset Management, a bank founded in 1895, is number two.”

Find the article here

Below: Chinese ecommerce is taking off with more progressive financial players launching or acquiring Fintech platforms (examples above). These Fintechs are fuelled by the leveraging of big data coming from internet based services. This allows the platforms to develop and provide more personalised and effective products.


Auspicious ecosystem for fintech growth 

In conclusion, a massive driver behind the rapid growth and success of the three Chinese tech giants Baidu, Alibaba and Tencent (BATs) is the auspicious economic environment in which they have grown. The relatively new capital market structure of China means that a large amount of legacy systems hindering innovation in Western Europe are not a problem for the Chinese. The BATs were also able to spot a gap in the market; Chinese banks like ICBC are state-owned and gain most of their revenue from lending to state owned enterprises (SOEs), thereby leaving a large fraction of the population unable to access credit and loans. This is where the BATs stepped in. The poor access to credit experienced by the average citizen coupled with a highly active smartphone population has proved and continues to prove to be a winning formula for Chinese Fintechs. One example to finish with is that Ant Financial’s Alipay handles more than half of the country’s $15.5trn online payments market, and has more than half a billion active users.


In the words of Geoffrey Garrett

“Anyone who ignores Alibaba and Tencent does so at their own peril”….