April 2016 to March 2017

Authors/Persons in charge:
Koichiro Ohira (Senior Fellow, Institute for International Socio-Economic Studies)

 The financial service is becoming more and more sophisticated with the utilization of ICT and the move is in drastic progress to create new financial service structure.

 The leading edge ICT technologies such as mobile terminals, big data, cloud computing are being combined with financial services to create new services, and Fintech companies are rapidly expanding their activities in competition with existing banks, security companies, and insurance companies.

 In this last report we reported the results and findings how Fintech (internet financing and banking) is being developed in China based on the on-site survey of Fintech companies in China where the internet and mobile communications of smart phone are rapidly expanding and the number of smartphone users are reaching the world No. 1 position, and Fintech companies are actually exceeding the financial services of existing financial institutes.

 A number of reports are made on the Fintech in USA or in UK, but very few are on the Fintech in China. The fact is, however, that China might be advanced to USA and UK in terms of number of users of Fintech, internet financing and banking and in terms of how deep and close such internet service are used by the people. The Fintech service is now expanding even in Japan. Major Chinese internet financing service such as Alipay and Tenpay are already in service in Japan.

 If we look into their services, we can find that the third-party on-line payment service is their main area of service through e-commerce. The on-line payment service is also associated with the mobile terminals such as smart phones, so mobile on-line payment is so popular at any shops in China. In the field of financing, the P2P (Pier to Pier) lending is getting popular and the direct financing transaction is being made on-line platforms between companies or private users. So called “Micro Credit” is also getting popular that non-banking companies are lending small amount of money to the individuals and small and medium enterprises.

 Similar to the scheme of P2P lending the cloud funding scheme is also under development, where the financing and investment is made, for example, to the transactions of shares of unlisted companies, unreleased product or services by the investors or end user consumers.

 Assets Management is covered mainly by the internet MMF (Money Management Fund) in combination with the third party on-line payment service.

 Major players or providers of internet financing in China are Alibaba, Tencent, Baidu  JD.com and SUNING who are all leading internet services providers in domestic China.

 Among them two companies are really dominant in this Fintech business , namely, Alibaba who has major market share in e-commerce business and Tencent who has major share in SNS business.

 Base on their existing large user basis in their original business, they are additionally increasing the number of users in their variety of internet financing services.

 It is also to be noted that most of their variety of financing services are ready to use through the internet home pages and combined smartphone applications .

 As for the administration and regulation of the government the US Government do not have any special view or treatment on Fintech companies basically in the same manner to the existing banks and financial institutes. On the other hand Chinese Government is promoting “Internet Plus” initiative where they are promoting the development of Fintech, internet financing.

 The problem is that the social troubles and risks such as fraud, bad debt are increasing and visible 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 laws and regulations.

 Through these actions the Chinese government will be sure to promote orderly expansion of Fintech industry.