China: fintech companies passed disruption edge - report

Chinese fintech firms now have a similar number of clients as the largest banks, according to a report issued by Citigroup, Bloomberg reports. The country’s major internet companies have gained considerable market share in ecommerce and third-party payments, and were faster than lenders in offering alternatives to traditional payment methods.

“In China, unlike the US or Europe, we are well past the tipping point of disruption,” the report said. “China’s ecommerce ecosystem is now larger than any other country in the world in terms of transaction volume.”, the source cites.

Banks around the world from Citigroup to Standard Chartered Plc have been exploring ways to benefit from applying new technology to areas as diverse as lending, payments, trade finance and compliance as they seek to cut costs and improve profitability. Investments in financial technology had grown to USD 19 billion by December  2015, from USD 1.8 billion in 2010, according to Citigroup’s report.

Retail banking automation alone is expected to be the main driver behind a 30% reduction in staff at lenders between 2015 and 2025. The bank estimates US and European firms will cut about 1.8 million full-time employees in that period, on top of the 730,000 job losses since before the global financial crisis.

The growth of financial technology in China has benefited from the distribution networks of Internet companies Alibaba Group, Tencent and Baidu Inc. for businesses ranging from payments to lending. More than 416 million people used online payment systems in the country by the end of 2015, up 37%  from the previous year, according to a report by the China Internet Network Information Center. Mobile-payment users climbed 65%, the report showed, the source cites.

The country’s e-commerce industry is worth about USD 672 billion and is expected to more than double to USD 1.6 trillion by 2018, accounting for more than half of global ecommerce, according to Citigroup’s report. China’s peer-to-peer lending business last year of USD 67 billion was more than four times bigger than the US market.