Rapidly expanding Fintech service in China 3/3Main Players are leasing internet companies

By Koichiro Ohira, Senior Fellow

Huge number of customers

 When we see who might be main players in the field of Fintech service, we can find in USA and in Japan Fintech Start-ups and existing financial institutes as major players.

 Things are a bit different in China as we can find such internet companies as Alibaba, Tencent, Baidu and JD.com are actually dominant in the field. These gigantic internet companies can enjoy the advantages of using their enormous customer base to easily invite users for their Fintech service from the start. It is true that in China similar kinds of Fintech Start-ups are active in the field, but, they are not recognized widely in the industry as it is virtually impossible for them to compete with gigantic internet companies from the points of customer base, brand name, and a variety of services already established.

Expansion of services

 In USA existing financial institutes are actively acquiring Fintech start-ups to strengthen their financial services. In China internet companies are trying to acquire such Fintech start-ups to expand their Fintech service while many start-ups are not directly involved in providing financial services to consumers, but, are rather focusing on such business as specialized big data analysis to work with other internet financial service applications.

 We may see Chinese gigantic internet companies will further advancing their expertise and capability in the field of development of AI and the big data analysis firstly by gathering further enormous amount of information through their new services in financial loans and payment and settlements on top of their existing business of e-commerce and SNS services and secondly by acquiring the new technologies and know-how created  by Fintech start-ups.

 Chinese government and associated regulators seem to be positively supporting the deployment of internet financial services in the policy of Internet Plus. Chinese Economy is shifting their basis of growth from investment-led to consumption-led, and Chinese Government trying to support and uplift the level of consumption among SME and individual consumers through the new financial schemes easily accessible by internet or mobile devices such as smart phones.

Major Regulators in the field of Internet Financing
Area of service	Regulators
Internet Payment	People's Bank of China
Internet Financig (P2P/small load)	China Bank Regulations Committee
Cloud Funding	China Securities Regulations Committee
Fund Transaction	China Securities Regulations Committee
Intenet Insurance	China Insurance Regulations Committee
Internet Trust/Consumers Finaning	China Bank Regulations Committee

Regulations under review

 On the other hand the social problems and risks such as fraud, bad debt are increasing and notable in this new financial scheme, so, Chinese government have been since the year 2015 taking measures to define the clear responsibilities of regulators and to review relevant regulations.

 We can easily imagine that many financial institutes in China used to be state-owned, so, they should be negatively observing  the progress and expansion of internet financing services in order to protect their own interest.

 Even under such situation and negative reception of incumbent financial institutes Chinese government are really serious to shift positively their economy to consumption-led economy by revolutionizing their financial scheme with the help of new technologies and private enterprises.