Let me start by asking you one question: Who really enjoys its banking experience? Well! we have good news. The good news is we are currently going through one of the biggest transformations in Financial history: The Fintech Revolution.
Fintech in China: Smart Strategy to Be Part of the Financial Revolution?
What I want to share today is how the Fintech Revolution will have winners and losers that is may have a significant impact on the financial sector. Those who will be most significantly impacted by this Fintech revolution are going to be those who work in the financial industry. The bankers of the future will be very different from the bankers today.
What is Fintech?
Fintech short for financial technology is the innovative use of technology in the design and delivery of financial services and it’s transforming the banking world as we know it. Things from Artificial intelligence, peer-to-peer lending, big data, blockchain, crowdfunding, digital payments, and Robo-advisors.
What should you know?
- Competitor development
- Customer profile
- New domain/unexplored market opportunities
Fintech in China: Who’s going to be the winner or the loser in Fintech?
Fintech International Companies Challenges in China
Complex China Market:
- Cluttered media landscape
- Consumer behavior differences
Competitors & Alternatives:
- Lots of similar companies in the industry
Lack of Local Market Expertise
- Lack of Chinese consumer data
- Difficulties in identifying the target audience
In 2017, the revenue of China’s financial technology companies reached nearly 654.1 billion Yuan, soaring 55.2% compared with 2016. In this article, we will analyze China’s Fintech Market, Trends, and Marketing Strategies that companies have to use to integrate this innovative market in China.
Will Fintech be the downfall of Banking in China?
- This is the beginning of a bankless world
- Online lenders could capture 70% of small business lending
- There are + 3.4billion third-party payment accounts in China
China’s Fintech market is expected to grow 44% annually, with the industry’s total revenue reaching Rmb460billion by 2020.
- How did FinTech get so big in China?
- What is the China Fintech landscape?
- Who are the key players?
Banking and Fintech are “Better together”?
China is the world’s leader in Fintech. It is definitely, the biggest market for digital payments, accounting for nearly half of the global total. Don’t forget that, it is dominant in online lending, occupying three-quarters of the global market.
- Existing customer database
- Low cost of capital
- National Bank act protections
- Regulatory compliance
- A strong personal relationship with Customers
- New ideas
- Agile implementation
- Cutting edge analytics
- Online Customer acquisition
- Online mobile UX design
Other areas include online lending, consumer finance, online money-market funds, online insurance, personal financial management, and online brokerage.
A ranking of the world’s most innovative fintech firms gave Chinese companies four of the top five slots last year. The largest Chinese fintech company, Ant Financial, has been valued at about $60bn, on a par with UBS, Switzerland’s biggest bank.
The Future of Chinese FinTech
Over the years, China continues to dominate the global FinTech market with a very strong domestic market. Moreover, the push and pull factors in order to catalyze the establishment of a leading digital finance sector. On the other side, capital investment is pouring in and the market is being bolstered by substantial government support for innovation.
On the pull side, demand is being driven by under-served SMEs and tech-savvy, often unbanked, consumers keen to access financial services via their mobile phones. Overseas, Chinese FinTech firms will also play an increasingly important role in the global collaborations driving technological innovation. What these companies learn abroad, they will bring back to the domestic market, further fueling the sector to stay ahead of the rest of the world.
The traditional banks are worried about the tech firms because they know that many of these tech firms have daily existing touchpoints with customers. Moreover, they have their trust and confidence.
Others are experimenting with gamification with Virtual Reality as tools to provide financial services to millennials in ways they may actually enjoy and that’s is an important area of focus. A recent study shows that 80% of millennials would rather go to the dentist to hear what their bank have to say. The landscape is changing and the best way to survive is being able to embed the culture of innovation and entrepreneurship across the organization.
Internet boom facilitate the use of E-commerce and social media
The Chinese domestic online marketplaces are dominated by some leaders such as Taobao (Alibaba), Tmall (Alibaba), JD.com was launched just a few years prior to 2000.
The mobile and internet boom pushed Chinese consumers to start shopping online, leapfrogging their under-developed traditional offline retail infrastructure.
It is important to note that the emergence of these e-commerce firms helped to the rise of the FinTech firms because many of them are their financial subsidiaries focused on payments and third-party remittances.
Alibaba Financial launched a money market fund that has become the third biggest money market fund in the world, dislodging incumbents who have been doing this for decades. That fund has more than hundred fifty million single investors who have an average invested less than one thousand US dollars each.
Tencent, the owner of the messaging App Wechat has become one of the most common tools to transfer, last Chinese new year the processed more than 10 billion red envelop transactions. The same Wechat, not only allows you to buy insurance products or invest in funds directly from your smartphone but also book your next doctor appointment, order a taxi, donate to charity, and event find a date without ever leaving the App.
There are a lot of reasons why China’s FinTech industry has developed so rapidly. The Chinese government has a very supportive policy and its loose regulatory environment has been allowed to innovate and develop this industry. The fintech industry has also helped to respond to the demands of groups that were previously excluded from traditional banking, such as small and medium-sized enterprises (SMEs) and low-income earners.
The Financial platforms of the future are not going to be the traditional banks but the technology firms.
The first category of players in the internet is leaders. These companies are responsible for most high-profile innovations that have changed China’s traditional finance industry and receive the most public attention. Moreover, this category includes well-known internet giants Baidu, Alibaba, and Tencent (BAT).
A lot of Chinese users use Tencent’s WeChat Pay and Alibaba’s Alipay every day to make third-party mobile payments. By the end of 2015, China’s third-party payments transaction volume was over RMB 10 trillion (US$1.56 trillion), which surpassed US and EU leaders such as Paypal. With their all-encompassing digital platforms and extensive ecosystems that take part in the daily lives of some Chinese consumers. The main players in this industry can easily collect massive amounts of data, which they will use to their advantage by predicting consumer behavior and offering more personalized and innovative products.
Small business lending
Last year, China’s central bank has announced, it will unlock funds for banks to boost lending for small businesses, in order to balance support for the economy without increasing already high corporate debt. The new policy will encourage more small loans.
The large majority of China’s workforce is employed by small and medium-sized companies, which represents an important factor in maintaining social stability. These businesses are also ready for the slightest changes in the market.
By 2022, the Chinese middle class will expect to reach more than76% of China’s urban population, double the size of the entire U.S. population. They’re more globally-minded and spend more than their parents. The average 24-35-year-old middle-class consumer is changing their behavior to become more and more like their American counterpart. This new generation of consumers has been brought up in a much more open society than their parents and grandparents. Social media has made it possible for Western culture to be seen, heard, and desired by the internet-savvy youth of China.
Chinese small businesses are experiencing strong growth and have become one of the most optimistic small business sectors in the Asia-Pacific. The high rates of technology use among Mainland China’s small businesses is one of the key drivers of growth, with over 80 percent of businesses in China earning more than 10 percent of revenue from online sales.
Recently, Chinese President Xi Jinping called his citizens to take the lead in the development of new technologies like artificial intelligence, networking, and blockchain. China wants to make the rural areas the key focus in developing inclusive finance in order to improve financial institutions’ rural vitalization strategies.
The growth of loans to farmers and small and micro agricultural businesses should increase while credit for targeted poverty alleviation grows at a higher speed. By the end of the year, townships without banking institutions and villages without basic financial services should be cut by over one-third.
At the end of 2017, financial services covered 96.44 percent of villages in China, while 95.99 percent of townships had financial institutions. Moreover, China’s outstanding loans to farmers, agriculture, and rural areas totaled 30.95 trillion yuan (4.89 trillion U.S. dollars), up 9.64 percent year on year.
The main challenge in promoting rural financial sector development is having a sustainable, systemic impact. The policy approach and business practices necessary to meet the credit and financial services needs of all smaller businesses are increasingly well understood.
Recently, the China Banking and Insurance Regulatory Commission said that investments by banks cannot exceed 35 percent of the outstanding amount of their wealth management products or 4 percent of their total assets. By the end-2017, 562 banks had 29.54 trillion yuan ($4.63 trillion) in outstanding WMPs, according to official data.
China has a huge potential for digital wealth management as more Chinese Fintech firms are using technology in wealth management services. China’s wealth management market reached 6 trillion U.S. dollars, with an online sales penetration rate of 34.6 percent, by the end of the first quarter.
Actually, China has a strong footing and is expected to become the world’s fastest-growing digital wealth management market, with technology playing an even greater role in the industry.
As they accumulate more wealth, Chinese consumers are hunting for higher investment returns—meaning that all investment products, except savings, are expected to maintain rapid growth. That provides opportunities for Internet-based wealth-management businesses.
There are a lot of ways global asset managers can take part in this market. we have:
- Onshore private funds: Set up an investment management wholly foreign-owned enterprise (IM WFOE), and apply for qualification to operate a private securities fund management business.
- Onshore public funds: Participate in a joint venture of mutual fund management companies. The foreign ownership limit is now lifted to 50% and will end after three years.
- Outbound investment for Chinese investors: Provide Chinese investors with investment products/advisory on offshore assets through quota programs such as qualified domestic limited partners and mutual recognition of funds programs, or become an adviser to qualified domestic institutional investors.
Offshore investments into China: Invest in Chinese assets via offshore entity and various quota programs such as qualified foreign institutional investors (QFII) and qualified foreign limited partners.
Financing: Peer to peer
The P2P (peer-to-peer) lending sector is braced for a second regulatory crackdown as a new “record filing” system kicks off in April.
Peer-to-peer platforms offers to consumers an alternative to loans that used to be previously available mainly at banks.
China’s P2P lending industry recorded transactions valued at $445bn in 2017, according to Online Lending Club, a data company. While that is less than the $458.3bn that China’s banks lent in January.
- P2P lending in China has helped borrowers overlooked by traditional financial institutions.
- Many Chinese Fintech firms were initially reluctant to share information, but data sharing has turned out to be a benefit for the entire industry.
- As the industry has matured, banks have become essential partners for P2P firms.
- A combination of traditional and alternative data sources works best for making credit assessments.
Over the years, companies have still contributed the majority of banking revenue in China and the long business-to-business value chain generated both opportunities and innovation. Chinese companies are shifting from simply borrowing to having more complicated needs, such as transaction banking and asset management.
P2P Companies know a Reputation Crisis, many companies Closed or get bankrupt
Beijing is facing anger from mom-and-pop investors after 1000 P2P platforms imploded, wiping out their savings.
This Crisis attack China’s financial industry and Chinese authorities that allowed it to grow rapidly with little oversight, now Promises to Regulate this Industry. These companies that deliver double-digit returns attracted a lot of Chinese Investors looking for more lucrative places to put their money than conventional banks.
But a recent crackdown by the central government in Beijing has helped trigger a sharp increase in the number of platforms going bust.
The crisis has hit people like a construction project manager in Beijing who told CNN he invested more than 275,000 yuan ($40,000) with a site that suddenly shut down last month.
“The first reaction is disbelief. I didn’t believe the platform had collapsed … But in the end, I had to accept the truth,” the 28-year-old man said, declining to be identified for fear of government retribution. He said the amount he lost included his parents’ savings, money he’d borrowed from friends and funds he was planning to use to buy an apartment for him and his pregnant wife
Insurance: Financial Cloud
Cloud-based services allow customers to be served based on demand. Cost-effectiveness is a major advantage, with the cloud allowing customers to easily access information with minimal up-front and overhead spending. It also allows customers to retain flexible infrastructure that can be quickly scaled up or down. That’s especially important for small players who need to rapidly build IT capabilities to serve explosively growing user bases and fluctuating volumes.
Robo-advisors platforms offer consumers asset management solutions that are not only transparent in what they charge consumers but also substantially cheaper.
China’s forex reserves are very stable, According to the laws of China, all offshore financial institutions are supposed to receive a license from the local institution before they can start offering their services.
Last year, SAFE(State Administration of Foreign Exchange) issued an order to third-party payment service providers (PSPs) to stop allowing money transfers to unregulated forex brokers in China. Over 40 forex brokers were not allowed to transact in China. These companies allow individuals to send money directly to the forex brokers in China, even though they may have not been regulated.
The forex market is very competitive in China, the Chinese government has really reinforced rules for foreign companies that want to lead forex trading business in China. But with a strong digital marketing and Search Engine Marketing (SEM) can help you to succeed in this market.
Do you want to take part in the Fintech Revolution in China?
Anything is possible when you manage your money in the right way
Lead Generation: How to Attract Chinese Investors
Lead Generation is a way to promote your company in order to attract new investors to your business and thus, improve your amount of leads.
Lead generation in China can be tricky, it is a very different marketplace for businesses to operate in. Some businesses forsake an online marketing strategy but the most effective way to develop and generate leads in this market is digital. In China business introductions and connections are often developed online before meeting face to face.
Connecting with factories for cost-effective production in China is essential. There are opportunities for an affordable, mass Fintech market with the infrastructure in place to invest at the best market rates.
But how do you connect with Chinese factories and establish strong business relationships?
You need to develop your e-reputation and visibility online in China.
- A Forex company in China, invest 80 000$ / mo and generate 800 leads per month, and is able to convert 15% of them.
- This Forex company gets good development, because some clients, and discover that Online Business is more than a platform.
SEO Search Engines Optimization SEM Marketing
Once you have created your Chinese website, the next step will be to become visible on the most powerful Chinese search engine: Baidu which dominates 82% of the Chinese search engine market in Finance
MONEY is the most searched keyword in China, with 100 00daily searches.
Here it will be very beneficial if your company is one of the top search results this can be more efficient through advertising with PPC, banner ads, and paid links or more effectively highly ranked in the natural search results. Investors need to see that you are a legitimate and established proposition in China with the traction to continually invest in the orient. A high ranking on Baidu is the ultimate proof of this. This approach can take time but based on optimizing keywords you can increase your visibility.
For doing business in China, it’s all about the “first impression” and the first page of Baidu gives a lot of ‘credibility’ to your company. If you are looking at the natural search results, you can increase your ranking by utilizing a number of techniques:
- Producing quality, original content
- Sharing and dissemination of content
- Keyword optimization
- Backlinks campaign
- Weblinks and referrals
- Chinese hosted server
- Chinese, Mandarin optimized website
- Chinese domain/URL
Once you have developed your visibility you will be seen as a valid business proposition. The mistake many companies make is that they try to transplant the existing SEO strategy that they use in western markets.
It is a different digital landscape, Baidu’s intelligent system called the ‘Spider’ prioritizes Chinese-specific factors such as a Chinese domain/URL, Chinese servers, Chinese content, and keyword optimization is all in Mandarin. more information here.
Fenix Markets is the Forex trading arm of Bader Capital PTY LTD, which is an Australian company located in the financial district of Sydney (Australian financial companies are regulated by the Australian Securities and Investment Commission which ensures that the ASIC is the relevant authority in charge of Fenix Markets regulation.)
GMA helped Fenix to develop the Chinese Business and attract Chinese Clients.
- Maximize the number of new user registrations and app installations
- Acquire high-quality users at scale
- Enhance brand awareness among affluent Chinese consumers interested in foreign
exchange trading and financial services
Chinese audiences who are within the age group of 25-50 and interested in financial products,
property and other luxury goods.
Black & Whitelist
- Whitelist sites with historically high conversion rate integrated media inventory
and utilize blacklist to avoid undesired websites
- Build a lookalike audience model by identifying audiences with similar characteristics to the
current site visitors and converted audiences
- Re-engage visitors to bring them back into the conversion funnel
- Re-target audiences that have clicked on the ads but have not visited the webpage
We use to manage an Advertising campaign with a Company that has an e-reputation problem in China, and when you search the Name of Baidu, we can easily find 20 angry clients that complain to have lost money.
Story of Swiss Forex Bank wants to target China
- This Company invests 20 000$ in ads on PPC on ads, and never gets even one lead because Chinese Investors are checking carefully the company they will deal with.
After being in top rank on Baidu, our next step is to develop your e-reputation, there are many specific business forums such as Sohu, QQ, Zhihu, and Baidu Tieba where you can generate positive comments about your company. Businesses still look for other business reviews and investors in China still use dedicated forums (unlike in the west). Positive comments can be up-promoted whilst any negative comments are hidden with an effective campaign.
A comprehensive e-reputation campaign consists of:
- Sharing of content
- Forum management of content
- Conversational thread development
The key is to establish yourself as an expert in your sector. E-reputation is how you prove to companies that you are established and a serious proposition, do not neglect this aspect of your campaign.
Display Site Platforms
Since 2012, DSP has become a major competition area of all the “powerful and innovative” companies.
China’s DSP market grows very fast, and actually is evaluated at more than RMB 23.5 billion compared to USD 3.47 billion in 2017 as indicated by iiMedia Research. The Mobile DSP market will reach RMB 13 billion by 2020 that is USD 4.92 billion in 2018.
The main three classifications of DSP promoters are, gaming (17.4%), finance (12.9%), and e-commerce (19.1%)
GMA is the leading Innovative company for marketers and the leading provider of digital media trading technology and services such as demand-side platform (DSP).
Knowledge of the external way to communicate can determine the success of your China public relations strategy. China is one of the few countries where print media has not faced a steep decline, Newspapers have still had success among consumers. But, these trends start to change, with the increase of online media platforms reducing the power of print media.
The increase of online media made the Chinese landscape more fragmented and seems complicated for New Players in the market. But it presents a lot of opportunities for China’s public relations strategy. Many of these online media platforms are independent of the government. Public relation is not so hard to understand in China, but you need to know how it works and the values of this culture.