Fast Growth for Nimble, Formidable Fintech

The internet’s incursion into territories long dominated by banks is accelerating in China as financial technology firms leverage computing skills to serve a growing consumer market.

China is the world’s undisputed leader in the “fintech” space, where technologically adept companies with big data access harness the internet to link lenders and other financial institutions to consumers, small businesses and retail investors.

In a recent report, analysts led by Katherine Lei at J.P. Morgan in Hong Kong heralded fintech as a “lucrative” business opportunity in China, where 2016 consumer online borrowing doubled from the previous year to about 75 billion yuan. This year, it’s expected to double again to 158 billion yuan.

“We expect fintech to become a 460 billion yuan revenue market in China by 2020,” Lei wrote.

A broad look at fintech’s role in Chinese online banking by Bloomberg analyst Francis Chan cited “continued growth in online purchases” as fuel for internet-based consumer lending. Of the 25.1 trillion yuan in household borrowing nationwide last year, he said, credit card and consumer loans accounted for about one-fourth.

Fintech companies earn fee income without incurring the risks shouldered by banks. And while they should avoid competing against banks, Lei wrote, fintech firms make excellent bank partners.

Fintech is all about “enhancing user experience and client acquisition, reducing operating costs by leveraging technology, and managing credit risks by utilizing big data analysis,” Lei wrote. And it’s on the front lines of the internet’s financial industry incursion.