Fin­tech sec­tor to rocket, re­port says

China Daily (Hong Kong) - - BUSINESS - By CAI XIAO caix­iao@chi­nadaily.com.cn

Chi­nese fi­nan­cial tech­nol­ogy com­pa­nies could ex­pand the lend­able pop­u­la­tion from around 200 mil­lion cred­it­card-car­ry­ing prime bor­row­ers to around 800 mil­lion, ac­cord­ing to the lat­est re­port of global con­sult­ing firm Oliver Wy­man.

The re­port said big-data anal­y­sis, the in­ter­net of things, and blockchain are the three tech­nolo­gies with the great­est po­ten­tial, ow­ing to their ground-break­ing ca­pa­bil­i­ties to ac­quire, as­sem­ble, an­a­lyze, and ap­ply in­for­ma­tion. Data treat­ment and in­for­ma­tion pro­cess­ing are at the heart of de­ci­sion-mak­ing for fi­nan­cial ser­vices, es­pe­cially in China.

Blockchain uses a cryp­to­graphic net­work to pro­vide a sin­gle source of truth, en­abling un­trust­ing par­ties with com­mon in­ter­ests to co-cre­ate a per­ma­nent, un­change­able and trans­par­ent record of ex­change and pro­cess­ing with­out re­ly­ing on a cen­tral author­ity.

The re­port said the ap­pli­ca­tion of th­ese tech­nolo­gies will cre­ate sig­nif­i­cant dis­rup­tions along value chains and bring about dis­tinc­tive op­por­tu­ni­ties for ma­jor ar­eas of the fi­nan­cial ser­vices sec­tor.

In fi­nanc­ing, with the avail­abil­ity of non-fi­nan­cial data sources and im­proved knowl­edge of how to use it, fin­tech play­ers will be able to use be­hav­ioral data-based mod­els to bet­ter judge which cus­tomers in­tend to re­pay their loans, and so iden­tify fraud risk.

“For dig­i­tal lenders, such ad­vances open up a blue ocean with a long tail of around 600 mil­lion Chi­nese bor­row­ers who were tra­di­tion­ally con­sid­ered be­low-prime and too risky to lend to,” said Cliff Sheng, Oliver Wy­man part­ner and au­thor of the re­port.

In in­vest­ing, with stronger bil­lion com­put­ing ca­pa­bil­i­ties, on­line wealth man­age­ment plat­forms can con­duct de­tailed anal­y­sis by pulling to­gether var­i­ous types of data about the mar­ket, in­di­vid­ual se­cu­ri­ties, and in­vestors, the re­port said.

“As­sum­ing th­ese so­lu­tions with fin­tech ap­pli­ca­tions at­tract 2.5 per­cent of in­vested as­sets by Chi­nese self-di­rected in­vestors by 2020, th­ese would rep­re­sent as­sets un­der man­age­ment worth 5 tril­lion yuan ($743.62 bil­lion),” Sheng said.

In the area of in­sur­ance, con­nected ecosys­tems, along with the in­creased adop­tion of tech­nol­ogy de­vices, pro­vide not only gate­ways to in­no­va­tive in­sur­ance prod­ucts but also al­ter­na­tive data sources for tai­lored prod­ucts and pric­ing, it said.

“Such tech­nol­ogy up­grades and ecosys­tem em­bed­ding could present in­sur­ers with pre­mium rev­enues amount­ing to 400 bil­lion yuan by 2020,” the re­port said.

Ac­cord­ing to the re­port, China’s fin­tech sec­tor has at­tracted $6.4 bil­lion in in­vest­ments in 2016, mak­ing it the global leader in fin­tech ven­ture cap­i­tal ac­tiv­i­ties rep­re­sent­ing 47 per­cent of global fin­tech in­vest­ments, up from only 7 per­cent in 2013.

With this ma­jor po­ten­tial for a new wave of tech­nol­o­gy­driven growth, there is no one­size-fits-all ap­proach that will suit all mar­ket play­ers.

The re­port sum­ma­rized key suc­cess fac­tors: data abun­dance and ap­pli­ca­tion, a large cus­tomer base, avail­abil­ity of pro­pri­etary and com­pre­hen­sive prod­ucts, and strong knowl­edge of fi­nan­cial ser­vices and risk man­age­ment.

total in­vest­ment in China’s fin­tech sec­tor in 2016

LIU XIANGUO / FOR CHINA DAILY

A vis­i­tor tries out a ma­chine for fit­ting glasses at the 2017 China In­ter­na­tional In­ter­net of Things Tech­nol­ogy Expo in Bei­jing.

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