Survival of the fittest (fintechs)

Granted, 2020 has not been an easy year. However, global lockdowns and social distancing measures have led to a rapid quickening in the adoption of financial technology – for instance, I saw stats for Nigeria of 800% growth in the fintech space! China may not field such staggering numbers following the relatively quick control of the virus in H1, but take up of online and mobile financial service offerings have similarly accelerated here.

In that sense, despite Covid-19, this year was going very well for fintech players in the mainland Chinese market. However, as for other markets around the world that we have discussed in our annual fintech publication, the increased accessibility and usability of technologies for digital payment and savings transactions has made regulators in the PRC sit up and reconsider the application and suitability of existing financial regulation. As a result, we have recently seen a surge in the regulation of the technology, the data and the lending practices that have fuelled the growth of the country’s fintech giants.

The suspension of Ant’s IPO, new caps on annual interest rates, and proposed rules to tighten regulation of online loans advanced by micro-lending companies: the article below highlights a lot of the key regulatory developments that are and will continue to shake up China’s financial technology landscape for the foreseeable future. In particular, I think the statement in the article is correct that – almost counterintuitively to the talk that we have heard in Europe and the US about breaking up Big Tech – in China, it would seem likely that it is the larger platforms that could stand to benefit from stricter but clearer rules, rather than the start-ups that may struggle to meet regulatory requirements on systems and capital.

However, I think the cited musing of Lufax’s chair Ji Guangheng is one of the most poignant notes in the write-up for fintechs navigating China’s tricky financial ecosystem: being on-the-ground and speaking to regulators, key stakeholders and the right advisors, in order to understand (and, if possible, seeking to influence) the direction of legislative travel remains the only way that true market leaders develop, flex and thereby retain their competitive advantage. It is no simple task, I admit – as regulations and their interpretation can shift overnight – but those that have the stamina for the uphill challenge will certainly be rewarded with a large pot of gold/digital coins worth climbing for!

Merry Christmas and happy new year to all!