“As China’s fintech industry, regulations and market has matured, the sector is entering a new age of development that is spurring demand for more tailored and technologically advanced solutions offering opportunities that foreign innovators can seize in China.”

This was the advice given by Benjamin Speyer, Founder and CEO of  global technology and financial advisory firm Serica, speaking at Jersey Finance’s latest Fintech Lunch and Learn online event  in April.

Hosted by Jersey Finance’s Strategy and Research Manager, Nathalie Andersson, the webinar explored China’s evolving fintech ecosystem and provided insight into the size of the sector, its big players, the latest trends, and the global impact this dynamic ecosystem has created.

Nathalie said:  “This is a really important area of opportunity for Jersey, which has long-established links with China and the wider Asian market, as firms continue to enter, evolve and expand their Asian activity.”

The session also focused on the key role fintech has played in the country’s development, with the Chinese fintech market having grown exponentially over the last two decades.

China’s economy now boasts the highest penetration rate of fintech services among major economies in the world at 90% with the market forecasted to reach one trillion US dollars by the end of 2023.

Despite a recent downturn in China, caused by a combination of market disruptions, financial reform, data privacy concerns and the pandemic, the sector is at a crossroads, having matured and aligned with increasing demand for more tailored, tech advanced solutions. This has created opportunities for foreign fintech’s.

“If you want to be a global company you need to be in developing markets. To be successful in developing markets, you need to be in China”, said Benjamin.

Opportunities

The People’s Bank of China recently released its Fintech Development Plan for 2022 – 2025 which promises regulation and governance improvements, advanced digital infrastructure development and digital transformation. The plan recognises the growing tech-literate class with a demand for smart digital and personalised solutions. It also focuses on green finance seeing fintech as critical to meeting the country’s carbon goals. AI, blockchain, cloud computation and data technology are also core areas of  development with a strong emphasis on financial inclusivity across China which currently shows disparity of tech adoption across its classes.

Benjamin advised attendees to avoid highly saturated markets such as digital lending, online and mobile payments and warned of the stiff competition for cross-border payments, blockchain and e-commerce. Instead, he highlighted the high opportunity within regtech, wealthtech and insurtech with current domestic companies seeking capabilities in these areas. Regtech sees a high demand for smart compliance solutions, whilst wealthtech sees a currently limited supply of smart and tailored solutions for high-net-worth individuals under 45 years of age.

“With Jersey specialising in wealth and regtech, there is a good alignment with the direction of travel and focus of China’s fintech strategy”, Nathalie added.

Advice for entering the market

Benjamin believes entering these sectors is achievable for companies of all sizes, that have a strategic and localist approach but warns that it is not without challenges and recommends understanding the risk appetite of all parties.

The market relies on a careful symbiosis and interdependent relationship between fintech companies, fintech institutions and big tech companies with Benjamin emphasising understanding where an organisation fits within this value chain to determine who to approach and how to do so.

Benjamin spoke about core principles that should be followed:

  • Be objective and make data driven decisions with experts rather than listening to emotional thoughts around China’s reputation.
  • Research and assess the readiness for entering China’s market with consideration around other countries first. Developing a thoughtful strategy can shape success or failure in the region.
  • Use a localised approach to the fragmented market that has a different culture and values.
  • Keep agile and flexible to keep pace. The market changes quickly.
  • Leverage local partnerships. Work with reputable and supportive local companies to guide you through the market. For example, forming strategic partnerships with a revenue split program where you receive market access, trust, and the ability to get a licence for your solution. Alternatively, working jointly with a large fintech unicorn who would manage market access, talent, regulatory matters.

To learn more about entering the Chinese fintech market, you can follow Serica on LinkedIn or contact them via their website.

In addition, Jersey Finance has a team of experts in Shanghai that can provide guidance on the market. To learn more about our work in China and upcoming events please contact Maria McDermott.