China global lead in Fintech and Mobile Payments

Mobile payments are just one of seven key markets for China’s booming fintech industry. Fintech is short for “financial technology” and refers to the application of technology within the financial services industry. This is information from a Brookings Institution piece, authored by Wei Wang and David Dollar.

Other areas include online lending, consumer finance, online money-market funds, online insurance, personal financial management, and online brokerage. Of the 27 fintech “unicorns”—fintech startups with valuations exceeding $1 billion—in the world, nine are Chinese (including one from Hong Kong) and 12 are American.

There is a 48-page DBY bank and EY analysis of the Rise of Fintech in China.

China has leapfrogged ahead to become the undoubted center of global FinTech innovation and adoption – thanks to developments across multiple hubs, such as Shanghai, Hangzhou, Beijing, and Shenzhen. The speed, sophistication, and scale of development of China’s FinTech ecosystem have been at a level unmatched in more established markets.

Forty percent of consumers in China are using new payment methods compared to 4% in Singapore. Thirty-five percent are using FinTech to access insurance products compared to 1-2% in many Southeast Asian markets. There are also significantly higher rates of FinTech participation in wealth management and lending.

China’s per-capita disposable income remains low at $4,044 in 2017. However, China has a large middle class. In 2016, approximately 225 million households earned between $11,500 and $43,000 a year—a group rivaling the size of the entire U.S. population of 323 million. As of December 2017, China had 772 million internet users (55.6% of the population), or more than the entire population of Europe. More than 95 percent of China’s internet users—or 772 million people—access the web via a mobile device.

In 2016, Chinese consumers spent approximately $22.8 trillion (RMB 157.55 trillion) through mobile payment platforms, far exceeding the volume of transactions in the United States ($112 billion). Over 90 percent of that sum stemmed from mobile payment apps that belong to China’s two biggest tech conglomerates: Alibaba’s Alipay (54 percent) and Tencent’s TenPay (37 percent).

China’s expanding outbound tourism industry offers an easy entry point for Chinese fintech firms. According to the U.N. World Tourism Organization, 135 million Chinese tourists spent a total of $261 billion abroad in 2016. This is far more than the United States, the world’s second-largest market for outbound tourism. In popular destinations such as Hong Kong, Thailand, Japan, and Korea, WeChat Pay and Alipay are aggressively expanding their reach by forming local partnerships with places frequented by tourists, including airport duty-free shops, scenic spots, shopping malls, and restaurants.

Since 2015, Alibaba’s financial affiliate and Alipay’s operator, Ant Financial, has invested in a series of mobile wallet and other fintech startups in India, the Philippines, Thailand, Singapore, and South Korea. Over the next four years, Alibaba expects more than half of its growth in users to come from overseas markets.

In 2017, Alibaba and Tencent have 92.8% of the mobile payment market: 53.7% of China’s mobile payment service customers use Alibaba’s Alipay, and 39.1% use Tencent Finance. This is Xinhua information.

China is leapfrogging over credit card usage. The centralized and vertically integrated Alibaba and Tencent have enabled the rapid expansion of mobile payments in China.

China’s Mobile phone payments

2015 2.2 trillion yuan
2016 58.8 trillion yuan (US$9 trillion)
2017f 98.7 trillion yuan ($15.5 trillion)
2018f 165.9 trillion yuan ($26.3 trillion)

according to iResearch Consulting Group in China.

That is more than 90 times the size of the U.S. mobile payments market, according to Forrester Research.

Credit, debit and prepaid card transactions for six major card networks shot up a combined 13.3% from 2015 to 2016, and purchase volume rose 5.8% to $20.606 trillion, according to new global data from card and payment industry publisher The Nilson Report.

Nilson reported that Visa, Mastercard, Diners Club/Discover, American Express, China’s UnionPay and Japan’s JCB cards had 257.17 billion purchase transactions in 2016, This was about 12% (30.21 billion) more than in 2015.

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