Planet New Economy


China has been leading many of the world’s fintech innovations in the past decade, due to its large mobile user population, relatively underdeveloped traditional financial infrastructure, and an accommodative regulatory environment. The country’s best-known platforms, such as Alipay and WeChat, are embedded in most aspects of consumer life, and internet payment penetration has risen from 30% to 86% of China’s internet users over the past decade, according to CNNIC. However, China’s fintech regulation is becoming stricter, particularly in the areas of anti-monopoly, consumer protection, and financial risk prevention. Fintech companies’ future success will hinge on how well they comply with these rising requirements. 

The proliferation of Payment+

Online payment channels – especially digital wallets – have become commonplace for consumers across China amid the growing cashless craze. In 2020, the number of online payment transactions processed by non-bank payment providers, dominated by Alipay and WeChat Pay, was 3.5 times the amount recorded by banking institutions, and it looks set to keep on growing. 

Slowing the borrowing boom

By combining vast amounts of consumer traffic, big data, and machine learning capabilities, Internet giants have expanded consumer credit services to individuals underserved by traditional financial institutions. For example, over 500 million people used Ant Group’s consumer credit services in the 12 months to June 2020, equivalent to 54% of China’s mobile internet users. However, the authorities are concerned that these services inducing excessive borrowing by consumers, especially among younger people and the worse off; China’s household debt to GDP ratio has climbed by 5 percentage points per annum over the last five years to hit 62% in 2020

More focused regulation

The pervasive spread offintech online services through much of China’s society and economy has led to greater government intervention, including the passing of a new law on personal data protection in November 2021 and the central bank regulating the transfer of credit data between financial institutions and data providers. The country has also piloted several regulatory sandboxes across the country to help create new standards and rules for areas from artificial intelligence (AI) and cloud computing, to blockchain and mobile finance apps. The combination of heightened scrutiny, greater risk control and targeted rules aims to support the more sustainable development of the fintech sector 

Financially including SMEs

Traditional financial institutions have long struggled to serve the needs of long-tail small businesses, but in China and this gap is increasingly being filled by fintech companies that specialize in offering unsecured business loans for small businesses. For example, MYbank, an internet bank partially owned by Ant Group, served 35 million of small businesses and small business owners cumulatively during its five years of operation history. Overall, around half of the financing demand by small businesses in China remains unmet, according to Oliver Wyman. China’s regulators broadly welcome this form of SME lending, but the fintech companies will need to balance a desire to make profits against their social responsibility to reduce small business financing costs.