China tops the rankings of world’s leading fintech hubs, according to a feature in Banking Frontiers. It says China has fintech giants like Alibaba and Tencent Holdings and Chinese cities have topped a new Global Fintech Hub Index 2018. While Beijing tops the list, there are Shanghai, Hangzhou and Shenzhen among the top 10. The list also includes San Francisco as the top city in the US, London in the UK, Sydney in Australia and Singapore in top slots.
FinTech Global says China’s fintech scene is largely helped by a welcoming regulatory environment for new fintech firms to get a foothold and fintech firms there collected up to $1.1 billion worth of investments in the first quarter of 2018 alone. The result has been a much higher adoption rate than most countries. China’s overall fintech adoption rate stood at 69% according to EY’s Fintech Adoption Rate of 2017 and the closest rival was India, at 52% adoption. Around 83% of Chinese consumer surveyed used fintech services to conduct money or payment transfers, the fintech segment with the highest adoption rates there.
An article on global fintech scenario says while China led the fintech space, India too witnessed massive investments in fintech with 32 deals in Q2 of 2018 along. What mainly helped create such a push are the government reforms towards a digital economy.
The article quotes KPMG, which in an India-specific study in collaboration with NASSCOM in the latter half of 2018, showcases 3 emerging technologies which are rapidly capturing the market and becoming effective catalyst in proliferating the digital landscape: artificial intelligence, open banking and blockchain.
As regards AI, the report says: “AI is gaining momentum in India with over 400 AI-related startups and attracting investments of $150 million, just over the last 5 years.”
For open banking, it says: “Banks which were traditionally confined to closed ecosystems are now allowing third parties to access data in real-time through open banking standards. It is observed that open application program interface (API) is the new reality leading to an open digital economy.”
As regards blockchain, it says: “Blockchain has the potential to redefine open and shared economy across areas such as payments, trade finance, know your customer, frauds reduction, clearing and settlement. Many financial institutions, in association with fintech firms, are establishing consortiums to co-create development. In India, it is estimated that blockchain has the potential to generate up to$5 billion in business value over the course of the next 5 years.”
Apart from these 3 distinct areas, with the country adopting digital in a big way, fintechs are actively involved in developing P2P lending, payments and remittances services, investment services, equity funding services, cloud computing and technology solutions and cryptocurrency.
With more than 40% of the population and 90% of small businesses not covered by formal banking institutions, and as much as 80% of all transactions still in cash, India offers a huge opportunity for fintechs. With mobile phone penetration going to be nearly 90% by 2020 and internet penetration also marching ahead, the growth potential for fintech is simply huge.
The article says it is gratifying to see some of the fintechs using machine learning and AI and data points such as social media footprints, call records and shopping histories to create patterns and hasten decision making even while traditional banks and financial institutions continue to use technology for simple tasks like account keeping, calculating credit scores, etc. Fintechs also boast of faster TAT in approval and disbursal of credit compared to banks, which also have embraced digitization in a big way.