Rapidly expanding Fintech service in China 1/3

By Koichiro Ohira, Senior Fellow

 In China, Fintech is called as “internet financing”, and, many people are actually starting to use it as very popular service in the daily life. The areas of services offered by Fintech is same as in Japan , USA and Europe, namely Transaction, Settlement, Assets Management and Financing.

Use of Mobile Terminals

 The number of internet users in China is counted as 731.25 million at the end of the year 2016, which is the largest in the world and especially in China the internet access are being increasingly made by mobile terminals. Internet is used for a variety of purposes, and, in the field of financial services 65% of users already use On-line Transaction and Settlement and 50% use On-Line Banking, which means more than 50% of users have already used those on-line banking and financing services.

 Separately from on-line transaction and settlement and on-line banking there are other financial services such as credit financing, investment fund transactions, and stock transactions.

 Relatively smaller share of users, say,  in the range of 10% are using these services, but, 10% of the total users in China represents actually still overwhelming number of users such as several tens of millions.

 In the area of transaction settlement the third party on-line payment service has been widely accepted to guarantee the delivery of the ordered goods and actual payment through e-commerce, and, especially the mobile on-line payment with smartphone is gaining the popularity to settle the payment at the shop through the third party on-line payment service from user’s deposited amount of money.

 The way for the mobile on-line payment is simple by normally using QR Code.

(1)Consumer or user shows QR Code by Smartphone at the shop and the shop keeper reads its QR Code
(2) Consumer or user use smartphone to read QR Code of the shop

Through either of (1) or (2) the money is transferred from user`s account to shop’s account.

Cashless

 There are a wide variety of shops or stores ranging from a large scale shopping center or Supermarket store to small scale store or street stall, even to auto rickshaw actually adopting the system , so, users need only smartphone in place of wallet for daily expenses.

 A single paper printing QR Code will suffice for the transaction without special hardware like card reader , so, shoppers can easily introduce the system as well.

 This transaction system using QR code is changing the traditional Chinese society to “cashless society” within a short period of time.

From Deposit to Investment

 The popular third party on-line payment service are Alipay by the largest e-commerce company, Alibaba and WeChat Pay by the largest SNS provider Tencent in China

 The money deposited in their account can be used not only for the transaction but for user’s assets management.  The articles for the investment are arranged for example Yu'E Bao by Alibaba and Financier by Tencent. They are called as internet MMF (Money Management Fund) where the minimum investment unit is as small as 1 RMB and investment can be instantly converted into the normal money for the transaction.

 The interest return of these internet MMFs is usually better than the normal bank deposit, so, Internet MMF have been attracting a large customers and their asset balance has been increased very sharply.

 Moreover user can get access as well to the normal investment trust operated by traditional financial institutes directly by application on the smartphone.

 This movement and progress has been the driving force vigorously to shift the assets management in China from deposit at bank to investment.