Chinese fintechs overtake Western rivals in innovation
Joint study by EY and DBS bank says Chinese finance firms are creating ‘something quite different, that isn’t just a slightly better bank’
China’s financial technology (fintech) sector has leapfrogged competitors in the United Kingdom and United States in terms of numbers and innovation and sophistication, a report by EY and Singaporean banking giant DBS has found, by offering tailored services catering to strong consumer demand.
However, the study also cautions it may still suffer a so-called “Galapagos Island effect” as the bigger players struggle to replicate their success overseas.
The study revealed a high percentage of Chinese consumers still without access to loans or credit cards, the country’s growing number of internet users, and the lack of regulatory barriers preventing technology firms from offering financial services, as key factors for the surge in growth of fintechs in China.
James Lloyd, Asia-Pacific fintech leader for EY, said unique market conditions in China had allowed technology companies such as Alibaba and Tencent to develop huge user bases for their related payment services and ecosystems, Alipay and WeChat Wallet – but these services have been able to grow domestically without any protection from predators, much like species on the Galapagos Islands.
“To replicate the Ant Financial [the payment affiliate of Alibaba Holdings] ecosystem outside of China, for instance, is extremely difficult, to put it mildly, if that’s their differentiator.” Lloyd said.
