Why China is the Future of Fintech


By Shane Meredith

Even though the basic technology behind it was invented in Silicon Valley the future of Fintech lies in China. China has the highest level of digital payment use and it is the home of the world’s most successful Fintech company; Ant Financial.

“You’ve got this whole lifestyle that you can live your life without cash,” Breaking Bankscontributor Matt Dooley said of the situation in China. Dooley noted that it is now possible to travel across China only using a digital wallet for payment. He also claimed to have met Chinese Millennials who had not used cash in years.

It is now possible to use digital wallets to make payments at roadside markets and in remote villages in China, Dooley claimed. That is in contrast to the USA where large retailers such as Walmart and major supermarket chains refuseto accept solutions such as Apple Pay.

There are some statistics that back up Dooley’s claims. Ant Financial’s digital wallet Alipay has 700 million registered users most of whom are in China, Statista data indicates. There are around 660 million mobile payments users in China making that country the largest user of such services in the world.

Not surprisingly Ant Financial is now the world’s most valuable unicorn just ahead of Uber. It was valued at $75 billion by CLSA last year, that’s more that the mighty Goldman Sachs at $70 billion. Not bad for a company that started as a humble subsidiary of Alibaba.

Nor is it just digital wallets, China accounts for 90% of global bitcoin trading, Reuters reported. Many analysts believe that the cryptocurrency’s recent bull market was driven partly by the weakness of the RMB.

Why is Digital Payment so Popular in China

Dooley attributes digital payment’s popularity in China to its simplicity and the popularity of smartphones there. Around 72% of the population own smartphones.

Alipay has enjoyed such success in China because it is easy to use and does not require elaborate technological infrastructure. Alipay relies on QR (quick read) code for internet access while Apple Pay and Google’s Android Pay use Near Field Communications (NFC) which requires a special cash register that accepts a wireless signal.

Using QR code all a merchant has to do to accept payment is to display an image. No expensive technology is needed. Not surprisingly one major American retailer Walmart and JPMorgan Chase have adopted QR code for their payment solutions. The two organizations are adopting Ant’s more successful solution rather than Apple’s.

How Chinese Fintech will Affect Finance Jobs

The Fintech situation in China has some serious implications for banking and finance professionals. The most obvious of which is that hundreds of millions of people might be connecting with the financial system without the use of a traditional bank.

All a person has to do to access Ant Financial services is to touch an app or scan a QR code. Such technology can easily be scaled up and reach people in the most remote areas.

That would give Ant the edge in serving developing markets such as Africa and India. It already has the expertise in reaching new markets quickly without building any expensive infrastructure or hiring large numbers of financial professionals.

Anybody that wants to see the future of finance needs to take a close look at Ant Financial and China. The situation there will soon be repeated all over the world even in developed nations such as the US and the UK. A new easily accessed financial system that bypasses traditional institutions is developing in China and it will soon spread throughout the world.

What’s next for Ant Financial? IPO