Forget Silicon Valley, for the future of financial services look to the east. Investments in Asia-Pacific in financial technology (fintech) ventures have doubled in the first six months of the year. China not only leads in APAC at $US9.62 billion, but also leads the global fintech investment as of July 31.
And it’s worth noting that the amount of investment in China in this period is more than twice the $4.26 billion invested in the region in all of 2015, according to Accenture analysis of CB Insights data.
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According to Beat Monnerat, Accenture senior managing director, Financial Services Asia-Pacific “China’s established companies, rather than nascent startups, are at the forefront of the fintech trend in the region.”
He said, “Fintech companies with major backers such as Alibaba and JD.com are focused on providing positive end-to-end customer experiences, which includes payments and lending. This is transforming China’s financial services industry and is consistent with the global ‘Fourth Industrial Revolution’, which is bringing innovation from non-traditional competitors to the financial services industry.”
Investments in Asia-Pacific have eclipsed North America, which garnered $4.58 billion in fintech investments as of July 31; and also tops Europe, which attracted $1.85 billion in the same period.
Deal volume remains higher in North America and Europe, however, as the Asia-Pacific increase is due to big investments in a few select fintech companies in China. There have been 192 deals in Asia-Pacific so far this year, compared to 509 in North America and 230 in Europe.
In fact, the top 10 investments in Asia-Pacific fintech ventures occurred in China and Hong Kong, accounting for 90 percent of overall Asia-Pacific investments and valued at $8.75 billion. In total, China and Hong Kong fintech ventures have attracted $9 billion in investments so far in 2016.
Ant Financial Services Group closed a $4.5 billion fundraising round in April. It is the financial-services affiliate of ecommerce giant Alibaba Group Holding that operates China’s online-payments platform Alipay.
Ping An-backed Lufax, which has started using the name Lu.com, completed a $1.2 billion round of fundraising in January. In that same month, China’s second largest ecommerce company, JD.com, raised $1 billion in new funding for its consumer finance subsidiary, JD Finance.
In recent years, major Alibaba affiliates and China’s biggest social network company, Tencent, have also invested in other smaller startups. They include Fenqile, a micro-loan site which literally means “happy instalments,” Qufenqi, an electronics retailer that lets buyers pay in monthly instalments, and India’s One97 Communications, a mobile internet company whose Paytm is its flagship brand.
“The fintech trend in China continues to skew toward online payments and lending, including peer-to-peer (P2P), which is creating market-share dilution for banks,” said Albert Chan, managing director financial services China, Accenture.
“China’s banks, whether building their own competitive platforms or not, should consider investing in collaborative fintech ventures in order to remain competitive.”