Internet and new technologies have allowed China to have a wider vision and openness on its environment. Social networks today also facilitate P2P transactions (peer-to-peer) by allowing a better match between supply and demand, which was not feasible before.
We are in an era where the adoption of the smartphone by a majority of the Chinese population allows them to be constantly and actively connected. Consumers can then offer or locate a good or service when they want it and where they want it and pay it instantly. The notion of space and time becomes more and more tiny.
China, a particular digital ecosystem
In a territory where all the features and social networks as we know them are censored due to the great virtual wall, China has been able to develop its own digital system. Over the years, the appropriation by all individuals of the digital system has made it possible to initiate numerous initiatives in terms of e-commerce and financial technologies. The sector is also supported by the Chinese government which does not hesitate to help and collaborate with market players to encourage this growth.
According to the investment bank GP Bullhound, “The solidity of domestic economy and e-commerce, high investment rates, support for the regulatory environment and the interest of under-banked companies and consumers for Digital services will continue to feed the sector.”
This exponentially growing market has reached a turnover of $ 63.2 billion in 2016 and foresees a total of $ 492 billion within two years. Chinese actors have nothing to envy their Western neighbors.
Indeed, two of the three actors of the BAT (equivalent of the GAFA) are part of the most important institutions of the financial world Alibaba and Tencent.
Three sectors of growth in the financial technology market are interesting to develop in this article.
The dematerialization of payments
The digital age in which we live presently offers the Chinese government and enterprises an opportunity to develop the market for digital money on the territory and to give a picture of a country competent in terms of financial technology in the world.
This increase in the dematerialization of the currency was put forward thanks to the Bitcoin. Launched in 2009 by an unknown individual, the Bitcoin makes it possible to carry out financial transactions without the need to go through intermediary, in our case, the bank.
In China, the relationship with the Bitcoin has always been somewhat complicated. Very recently the People’s Bank of China has decided not to recognize the Bitcoin as a legal tender.
However, the country sees in this dematerialization, a real opportunity for growth for its economy. Indeed, many investors have to transfer money outside the country due to the low value of the Yuan, slowing down the economy and financial markets.
To improve and control these financial flows, China is preparing to launch a national digital currency. The Chinese central bank has developed its own crypto-currency, currently being tested in the country.
Mobile payment platforms
The banalization of communication technologies and mobile information, such as smartphones, SMS and mobile Internet, has led to more practical and fluid connections in the daily lives of individuals.
The Chinese are generally known to be large consumers of technological devices. Sure enough, smartphones punctuate their daily lives. These types of behaviors have allowed the government and players in the digital sphere of China to develop and mobile applications to an even higher level.
According to Iresearch, the total value of payments made online in the country in 2016, would represent about 5.5 billion US dollars, making it the largest market in terms of online transactions.
The online payment platforms and a highly competitive market in China, where each actor tries to differentiate and gain the most market share.
Two players stand out and are the applications mainly adopted by Chinese consumers.
The Alipay application of the group is in the process of becoming more than just an online payment service application. Indeed, it is an entry portal to many merchant sites. The application offers its users a dematerialization and a fluidity of flows of transaction between person.
Thanks to its WeChat application, the company offers its users the WeChat Pay functionality. The company is strongly involved in the sector and tends to develop its activities to offer the consumer an integrated and complete application.
WeChat in figures:
- 938 million monthly users
- 70 million users outside China
- 200 million users own WeChat Pay
- 300,000 stores offer WeChat Pay
P2P lending (Peer to Peer in China)
P2P loans are becoming increasingly popular in China and make the country one of the most important and dynamic in the world. Indeed, in a Chinese market, where banks refuse more than 80% of loan applications, a parallel market has thus opened allowing individuals to access the loan.
The range of loan offerings on the market is varied and liberalized interest rates stimulate micro-credits on the Internet and the growth of several small businesses and start-ups.
The FinTech in China is a response to the new consumption habits of Chinese people. The players in the sector constantly innovate to facilitate the life of these consumers and compete directly with the giants of the banking sector.