What’s driving China’s fintech boom?

SINGAPORE (Dec 12): Every now and then, you see a media story somewhere about China’s ascendancy as a global fintech, or financial technology, player. The truth is that China has dominated the world’s fintech scene for nearly three years now and indeed has been its main engine of growth during the period. Two years ago, China became the world’s largest online alternative finance market by transaction volume.

Chinese fintechs have grown nearly fivefold since 2013 and now dwarf counterparts in developed markets such as the US. Within China, disruptive fintechs now have a lead over incumbent state-owned banking giants. In the first nine months of this year, fintechs accounted for 53% of all payments in China by volume, with banks accounting for the rest. More than 40% of all Chinese use one alternative financial product or another from a fintech provider. “Chinese fintechs now have critical mass, yet they are still in the third year of what is likely to be a 10- to 15-year evolutionary cycle,” Joseph Ngai, Hong Kong-based managing partner at McKinsey & Co, tells The Edge Singapore.

Over the next 12 months, several Chinese players will be seeking to raise billions of dollars to list mainly on the tech-heavy Nasdaq or the New York Stock Exchange. Bourses such as the Hong Kong Stock Exchange are again trying to see whether they can tweak their listing rules to entice players such as Alibaba Group Holdings’ affiliate Ant Financial, Tencent Holdings’ WeBank and Ping An Insurance (Group)’s venture Lufax to list there. The Chinese fintech listing bonanza next year is likely to be the biggest since Facebook’s botched listing in 2012 and Alibaba’s record-breaking IPO in September 2014, which raised US$25 billion.

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