China Outpaces New York, Silicon Valley in Fintech, Future of Bitcoin

Multi-billion dollar research firm Ernst  & Young (EY) and Singaporean bank DBS recently released a collaborative report entitled “The Rise of Fintech in China: Redefining Financial Services” [PDF] to provide insights of the explosive growth of fintech in China and to evaluate the world’s undisputed leader in Fintech.

After thorough collaborative research, researchers, analysts and financial consultants at EY and DBS concluded that China has outpaced London, New York, Silicon Valley, Singapore, Hong Kong and other leading global fintech hubs by a significant margin.

Neal Cross, DBS chief innovation officer stated that the rapid growth rate of the Chinese fintech industry can be attributed to favorable regulations and policies imposed by the local government on fintech startups and networks. Cross also noted that another major factor behind the growth of the Chinese fintech market is the increasing support from tech giants like Alibaba, TenCent and Baidu.

"It’s gotten this far because China’s landscape has operated in a sandbox-like environment conducive for FinTech to thrive — a strong domestic market, coupled with a constant push for innovation and experimentation driven by leading giants, unhindered by international influence,” said Cross.

Drivers of Fintech in China & Market Focus

Currently, the fintech industry in China is dominated by two major markets: payments / remittances and insurance. 40% of banking services customers rely on fintech platforms and applications to settle both domestic and international payments and another 35% of bank consumers utilize smart AI-based fintech services to deal with insurance.

The EY and DBS research team states that one of the key drivers of Fintech in china is the limited capacity of banking systems and services that continuously fail to meet the financial needs and demands of the Chinese people.

“At 20%, current retail loan penetration is also one of the lowest in the world. One in five of China’s adult population remain unbanked. In fact many Chinese do not have existing banking relationships as evidenced by the fact that national credit bureau only has information on less than 20% of the population,” the research paper stated.

More importantly, alternative financial technologies and services the Chinese people has begun to use has better online experience, functionality, lower fees and less requirements for account registration, penetrating a significantly larger population and consumer base in China.

Another fintech driver in China is the rapid increase in the number of internet users. Despite the local government’s crackdown on certain platforms and nationwide censorship of websites, the userbase of internet applications and mobile payment users grew exponentially over the past decade. Since 2014, the usage rate of mobile payment applications grew another 13.6%, with the 57.7% of all internet users using mobile payment applications.

What This Means For Bitcoin

Still, conventional financial applications and platforms have higher fees, lower security measures and excessive KYC policies compared to bitcoin services. This is because most financial applications depend on fiat or government-issued money to operate. Thus, more time goes into the verification and authentication of payments and users.

Bitcoin applications and platforms, however, enable instantaneous payments with virtually no KYC requirements. While exchanges do comply with KYC policies, the majority of applications in the bitcoin wallet market does not, as direct trading of cryptocurrencies doesn't fall under the Chinese money transmission regulations.

As an increasing number of bank users switch to mobile or online payment applications in China, the global bitcoin user base will most likely see a recognizable increase.

Images from Shutterstock and DBS.

About the author

Joseph Young
Joseph Young

Hong Kong-Based Finance and Cryptocurrency Analyst. Contributing regularly to CCN and Hacked. Providing unique insights into the crypto and fintech space since 2012.

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