Will China Lead The Way in Fintech?
In recent years, Fintech has seen incredible growth, to the point where it has now almost become an essential part of our daily lives. There have been two notable countries who have been very influential in the growth of Fintech and making it more accessible to the general public; these countries are the U.S. and the U.K.
Much of the innovation in the industry has largely stemmed from these two countries, resulting in them becoming fintech hotspots. However, over the last few years, there has been a new superpower emerging, and that superpower is China.
What’s the Fintech scene like in China?
The fintech industry in China has skyrocketed over the years, and the adoption rate is growing faster than anticipated. In fact, a global survey from Ernst & Young found that 87% of people in China have used fintech services. This make makes China the biggest adopters of Fintech in the world.
Although fintech usage is still relatively high in the west, with the U.K., for example, having a 71% adoption rate, Fintech has still become better integrated into the life of Chinese citizens. Cash use has declined in China, and Fintech has become completely mainstream, with mobile payment transactions at an all-time high. More than 300 million people now use their phones as a wallet for in-store payments.
How has China become a leader in Fintech?
There are a few reasons why China sees such success in Fintech, and it’s mostly down to huge private funding rounds, protection from international competition, and the industry’s heavy focus on innovation. All these factors combined have seen them leapfrog the likes of the U.S. and the U.K.
The extensive support that the Chinese government has provided to Fintech businesses has also been vital. The government has issued more than 750 government-led funds investing in the sector, in addition to tax breaks and subsidised technology. This support has been critical in allowing the sector to flourish.
Will China continue to dominate going forward?
China is now in a great position to dominate the Fintech industry for years to come. With various moves being made such as a nationwide program promoting the adoption of blockchain and the introduction of a new national virtual currency, the Chinese fintech sector looks set to make a major impact on the global financial market.
As we move past 2020, we’ll have to see how well Chinese fintech firms can attempt at entering developed markets. Rising concerns over personal data being acquired by foreign groups and constant changes in the current geopolitical climate could result in Chinese Fintechs experiencing potential setbacks. With fintech regulation also changing all the time, this could play a role in whether Chinese Fintechs can succeed and grow.
Although the Chinese Fintech sector will certainly face challenges, it appears that due to the growing consumer appetite for online financial services, they’ll be plenty of room for Chinese Fintechs to expand over the coming years. Also, with a government that looks heavily invested in promoting Fintech, it sets the stage for China to continue to dominate the world stage.