One of the most interesting facts I came across last year is that the market for mobile payments is 50 times bigger in China than in the US.
In an excellent briefing for MIT Technology Review, Martin Chorzempa explains why the Chinese are so far ahead of the West when it comes to ‘fintech’ (i.e. financial technology).
Basically, it’s all about the apps:
“Ant Financial’s Alipay and Tencent’s WeChat have changed the way many people live their financial lives. They are one-stop shops that enable half a billion Chinese to access a dizzying array of services, from payments, loans, investments, and credit scores to taxi rides, travel bookings, and social media.”
Online financial services obviously exist in the West, but there’s nothing to match the scale or scope of the main Chinese apps – and the services thereby enabled:
“Because so much is sold via these apps, Alibaba and Tencent know the health (or lack thereof) of many small businesses across China. As a result, they can lend to companies that banks might consider too risky. Likewise, people with no traditional credit score can get cheap loans because Ant Financial has their payment and purchase history.”
Of course, that raises the question as to why these apps have become so important and powerful compared to their western equivalents. Chorzempa makes it clear that it’s not because China has developed cutting-edge technology not yet available in the West. The key fintech systems were developed elsewhere, it’s just that the Chinese have run further and faster with what’s available than we have. Furthermore, they’ve done it in an astonishingly brief period of time; Chorzempa reminds us that just 15 years ago only 7.3% of Chinese people used the internet compared to 65% of Americans.
But perhaps what really needs an explanation is not the speed of China’s fintech advance, but the lack of progress in America and other western nations.
Tech giants such as Google, Amazon and Facebook have built up their empires by dominating a particular field of online service provision – such as search, online retail and social media. But missing from that list of digitised and disrupted sectors is finance.
Join the discussion
Join like minded readers that support our journalism by becoming a paid subscriber
To join the discussion in the comments, become a paid subscriber.
Join like minded readers that support our journalism, read unlimited articles and enjoy other subscriber-only benefits.
Subscribe