Opinion: These 3 sectors prove how China is using the fintech boom to pivot its economy

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Fintech in China has experienced exponential growth in the last several years. This owes to the country’s mobile-first initiatives and ecommerce developments.

Digital currencies, mobile payment platforms, and peer-to-peer (P2P) lending have had huge developments and increased usage within China, revolutionizing the banking industry. This growth is spearheaded by the collaboration of government entities and startups.

Digital currency

Digital currency is a large market that both the Chinese government and private companies can develop.

China has had a tumultuous relationship with bitcoin in the past. In 2013, it banned financial institutions from handling bitcoin transactions and in early 2017, the People’s Bank of China (PBoC) stated that it does not recognize bitcoin as a legal currency.

However, China does dominate the bitcoin industry in terms of volume. CoinDesk estimates that Chinese-based bitcoin transactions are up to 85 percent of the total market. The digital currency startup industry is also on the rise in China, with investment firms such as the Huiyin Group announcing venture funding for future digital currency startups through recently-established Huiyin Blockchain Ventures.

The Chinese government has also expressed interest and has a demonstrated proof-of-concept in the creation of a government-backed digital currency. In early 2014, the PBoC’s governor, Zhou Ziaochuan, said that the Chinese government was making efforts to establish an official digital currency. Government advertisements seeking blockchain experts in November 2016 bolstered this effort. This culminated in a trial run of the PBoC’s own digital currency in December 2016, with several major commercial banks participating in the effort.

The growth of digital currency in China, spurred by both the private sector and the government, helps propel Chinese fintech into the global stage.

Mobile payment platforms

With government-backed mobile-first initiatives paving the way for mobile consumers to access their data, China has become the largest market for mobile payments. Iresearch estimates that the 2016 value of China’s mobile payments is at over US$5.5 trillion.

Both Chinese consumers and companies have also embraced mobile payment platforms, with many retailers incentivizing consumers to pay virtually, as opposed to utilizing physical currency and card payment methods.

Companies are also strongly competing for market share against their peers and traditional financial institutions. Some of the most notable industry leaders in the space include Alibaba (Alipay), Lenovo (Lakala), Tencent (Tenpay), and WeChat (WePay). These companies are heavily involved in the Chinese tech sector, with solid footholds in consumer goods and mobile internet technology, among others. They leverage their internal product development by creating their own mobile payment platforms that reach a large number of consumers—across devices, platforms, and traditional banking institutions.

In fact, some estimates conclude that e-wallets accounted for nearly 60 percent of all mobile payment methods alone, allowing these systems to bypass traditional banking institutions completely and changing the way money flows in the market.

The use of near-field communication (NFC) and QR codes as forms of mobile payment also represent this growth. Both technologies are still seeing Chinese-driven development, and Chinese consumers have indicated a strong preference for QR codes. This is partly due to its ease-of-use and the continuing industry development of the technology.

See also: Opinion: Why QR code payments isn’t the future despite impressive rise

P2P lending

Conclusion