Saturday, February 22, 2020

Banking on the Digital Age: China Goes Mobile

Banking online is thriving across China as Internet giants take the finance world by storm! But does it signal the end for traditional banks? Nicole Webb investigates..

China is making a name for itself as the world’s frontier of online finance.

Seizing on the fact that statistics show 1.7 billion people used online banking in 2015, China is leading the way in digital platforms that allow you the freedom to keep your finances in check with the touch of a button.

Capitalising on its WeChat Wallet success, in 2015, Tencent developed the first phone app WeBank, whereby you can apply for a bank loan for your small business idea.

In an effort to diversify the banking industry, it was the first online-only bank approved by Chinese regulators and thus the start of an online banking battle for small business!

The E-Commerce Group, Alibaba followed in its footsteps launching staunch competitor MyBank – Their tagline, “Not for the rich, for the little guys!”

In fact the success of mobile spending, valued in 2014 at RMB22.59 trillion has even sparked global legend Apple to announce its partnership with China’s UnionPay in which its Apple Pay service is now available to all China UnionPay cardholders.

UnionPay is reportedly the latest big state-run company to feel the pressure of private sector competition, which is giving China’s entire financial sector a shake up.

The race is on to win over the trillion-dollar audience….


Automated advisory platforms are also entering the playing field. These “robo advisers” have already made their mark in the US and UK and now Asia is in their firing line. Offering online customised investment advice and portfolio construction, they are the next big thing for middle income Chinese investors.

Hong Kong based brokerage, 8 Securities launched its version of a robo adviser called ‘8Now!’ The first of its kind in Asia it targets retail investors with a minimum $10,000 investment. With this technology, it’s possible to automate the entire investment process, eliminating the need for person to person interaction.

Peer to Peer online lending is also making waves in China. The initiative which sees savers lend out money directly to small and medium-sized businesses and consumers via the web (often refused by the traditional banks) may have started in the US, but demand in China has since far exceeded them – its consumers now the largest in the world. Whilst there are a lot of unregulated P2P lenders — in a show of credibility, Standard Chartered Bank has just invested $207million? in Chinese P2P lending startup, The Series C funding was declared the largest ever for the direct lending industry in China and Dianrong has called the investment a “new chapter” in the burgeoning peer to peer lending sector.


The structure of the billion dollar banking industry in China is clearly undergoing a rapid transition but will it see the end of traditional banking?

Standard Chartered’s Anju Patwardhan says, “In emerging markets P2P lending is not, in the foreseeable future, a threat to banks. This is because these countries have fragmented markets and varying credit infrastructure and regulatory complexities, “making partnerships with established banks a necessity”

It’s definitely a game changer and Mark Wales, consulting partner at Deloitte China told Fintech, “The aggressiveness of the big three Internet giants is a different form of disruption compared to that in the US and UK. The big banks in China are watching them closely.”

Just recently Mainland China’s five largest banks announced they would start providing free money transfers via mobile banking in a bid to tackle increasing competition from internet finance services.

According to many analysts though, while online investment in these platforms is growing at a rapid rate, it’s still relatively small.

To succeed in a slice of the trillion yuan pie, there’s no question traditional banks will eventually need to embrace the new technology, from internet banking to mobile banking, e-payments, online portfolio advice and lending, but this new direction is also seen as a chance for a much-needed overhaul of China’s state-dominated financial system.

By Nicole Webb

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