The progress of financial technology (fintech) in China has been accelerated by the COVID‑19 pandemic with businesses increasingly moveing online. Since China’s efforts to reform and its policy of opening-up began, technology has played an essential role in its financial sector. fintech, which has been actively applied to improve financial services and supervision, has played a significant role in the development of China’s financial sector.
With the advent of the internet and mobile banking, fintech in China with fintech has made a huge leap forward. In the past few years, the Chinese government has laid the groundwork to allow for the networking of financial services. These foundations and the experience gained in the realm of innovative mobile finance have grounded China’s financial sector. China’s regulatory departments have always valued the application of science and technology in the financial sector, and see fintech as an important component in the construction of related infrastructures.
For regulatory bodies in charge of science and technology, the most arduous work was to allocate limited funding, in the form of appropriations from the state treasury to where it counts the most. The People’s Bank of China recently announced the establishment of the Fintech Committee and the development plan for which it will be responsible. This plan identifies the guiding ideology, basic principles, objectives and key tasks for the committee in the coming years. One encouraging sign is that some key areas have introduced incentive policies in their own jurisdictions,
Regulating fintech innovation
China’s regulatory framework is also constantly improving. In China, regulation is not seen as opposed to innovation but as complementary and mutually augmenting. China’s regulatory approach is both inclusive and explorative in the application of fintech. China has established tools to regulate fintech innovation.
Moreover, China has also created a series of standards and rules for areas including Artificial Intelligence (AI), cloud computing, blockchain, mobile finance apps and data privacy protection. Financial and governance mechanisms that incorporate administrative supervision and industrial governance are gradually being formed. As a result, China’s fintech industry has begun to flourish. Fintech can be applied in several ways, including traditional financial services firms reinvigorating products and services, as well as new entrants with new business formats and products.
The ecosystem of fintech is by and large abundant. The healthy interaction and competition among main actors have contributed to its continuous evolution. Other fintech-related facilities, such as industrial parks, incubators, featured towns and maker spaces, are also booming in China. These results are due to the successful fostering of talent through universities and research institutions. China already has certification systems for financial planners, investors and fintech talent, and it is stepping up efforts to roll out specific certification systems in many other fields.
The application of Chinese fintech has also been on the rise. According to research, the application rates of fintech among Chinese consumers and small and medium-sized enterprises are among the highest in the world: 87% and 61%, respectively. Interestingly, a large proportion of the elderly generation moved quickly to online forms of payment and mobile retail during the pandemic. In total, more than two-thirds (85.7%) of all Chinese citizens now use online payments.
While China’s fintech sector has developed successfully, several key areas need to be improved, including improving fintech regulations to prevent illegal activities, enforcing financial services legislation to protect customers, leveraging innovation-driven development, maintaining a secure infrastructure, and establishing a diversified governance mechanism.
As reported by OpenGov Asia, Chinese fintech strategies combined with current digital transformation trends will likely produce the following footprints:
- Fintech industries will be more online, open, and intelligent: Industries will convert more traditional services from offline to online and build an omnichannel strategy by tapping into emerging channels.
- New technologies and applications will be introduced to improve operational efficiency with emphasis on data factor: Industries will focus on the introduction of smart operations, smart risk management, and smart customer relationship management (CRM) with the integration of low-code SaaS applications.
- Integration of the industrial internet: China will focus on several core industries, deep dive into specific business scenarios, and connect financial services to the chain of transaction-account-data.
