Fintech reshapes China's financial industry
By Guan Xin and Jin Yang

Many shoppers like Zhang Liming now go with no cash, no credit cards, and no phone. All they need to do is to smile at the camera.

“Once you finish all the registration, it becomes easier to buy and pay for goods. This kind of payment is very convenient and saves our ­­time,” said Zhang.

This is one of the ongoing fintech revolutions in China.

With the new round of technological and industrial revolutions, significant changes have been seen in the finance industry. Cloud computing, data and analytics, artificial intelligence and blockchain have made great strides and set off a wave of fintech innovations sweeping the globe.

A KPMG report shows that global fintech investment in 2019 fell just shy of 2018 results, with over 137 billion U.S. dollars. Despite the slight drop, fintech investment more than double every year prior to 2018 – highlighting the enormous strength of the global fintech market.

Changes are also evident for many businesses. Even during the coronavirus pandemic, people in China could still enjoy financial services, as online apps are now handling a steadily growing volume of business payments, borrowing, and investments. More importantly, many innovative fintech companies are making these more accessible.

Daokou Fintech is a startup incubated by Tsinghua University. Zhao Xin, co-founder of Daokou Fintech told CGTN how they use big data technology to track the business activities of millions of enterprises, so banks can fully evaluate the risks of lending to small and medium-sized companies. Before this, financing was difficult for small and micro companies as banks usually favored big enterprises.

“We have the data of more than a hundred million and based on these we can build what we call cognitive graphs to recognize the relationship between companies, like what’s the position of the exact company in the supply chain, and what’s their demand and their customers. So by using this, we can also help them locate their suppliers and customers. And we help the financing service providers to locate the risk of companies.”

Zhao said it has served more than 100,000 small and medium-sized enterprises in China.

And beside enterprises, ordinary people can also get consumer loans much more easily with the new technology.

Efficiency has also improved exponentially.

“In the past, one person could handle only about 10 customers a month. Now using technology and moving the business online, they can handle millions of customers. It’s continuous improvement in efficiency,” Yuan Wei, CEO and founder of Daokou Fintech said.

Edgar Perez, a business author and keynote speaker told CGTN that fintech technologies are helping the financial industry to become more efficient, and reduce expenses. In the future, it is interesting to see how AI and big data can create new business models to transform the industry, which is the second stage of application of fintech in financial services.

Ernst and Young reported that China has been leading the world in the adoption of Fintech. China scored 87 percent in Ernst and Young’s 2019 fintech adoption index, much higher than the global average of 64 percent.

China also leads the world in fintech investment. An Accenture analysis shows that the value of fintech deals in China in 2018 accounted for 46 percent of all fintech investments globally in 2018.

The Chinese mainland now hosts eight of the world’s leading fintech unicorns. Tech giants, such as Alibaba, Tencent, JD and Baidu, are all racing to capitalize on the trend.

Shen Jianguang was chief economist of Mizuho Securities before joining JD Digits (JDD), previously known as JD Finance, a subsidiary of China tech giant For him, the move is shifting from traditional finance to embrace new technology.

“Never ever in China there is a chief economist in a technology company or a big data or internet company. Right? So this actually something that attracts me a lot. What I want to do is combine traditional economic research with the big data and technology and to actually maybe I hope to revolutionize economic research,” said Shen.

His experience was along with China’s transformation of its financial industry, powered by technology such as big data and AI.

By the end of 2018, JDD has connected with more than eight million small and micro businesses, 400 million consumers, and over 700 financial institutions. Its rural financial services has reached more than 1,900 counties and over 20 million users.

JD Digits also launched a new fintech service last November to help in the digitalization of operations for financial institutions in China.

“The finance business, there are so many competitors, there’s a banking industry which is very mature. And there are state owned banks. there are also a lot of market oriented private banks. So the competition is fierce. But actually we tried to leverage our technology to work with banks,” said Shen.

Wang Xing, director of CCID Digital Economy, said China has a very good foundation to develop fintech.

“From the global perspective, China’s tech giants are among the first to deploy cloud computing, mobile payment, blockchain technologies. Meanwhile, China has a vast consumer market, in which financial applications are diversified. Compared to other countries, China also has a sound policy environment to encourage fintech development.”

He also said fintech is key to China’s digital transformation.

“Fintech can effectively lower the cost of the national economy. It can connect supervision, tech companies, real economy and R and D institutions to form a digital economy, and therefore improve the targeting of financial policies, lower financing costs and improve efficiency.” 

China now has one third of its economic output related to digital economy, and hopes the transformation could be a growth driver and improve its competitiveness.

Professor Liu Xiaolei from Peking University said the new generation of fintech depends on two important factors.

The first is further technology development. Technologies such as AI, blockchain, big data, etc. can make inclusive finance possible, can extend financial services to ordinary people and micro-sized enterprises which did not qualify the traditional bank loan finance.

The second is further cooperation with fintech companies, such as Ant Financial, Duxiaoman Finance, with traditional banks. “The fintech companies are complementary to the traditional financial institutions. The cooperation of these two parties can act together, driving the fintech industry’s new development. “

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