The Road Ahead for China’s Fintechs
February seems a fitting time for Talks With to focus on China. The month kicked off with the Chinese Lunar New Year celebrating the Year of the Tiger, and we’re sure that many of you are allotting time to tune in to some of the Winter Olympics taking place in Beijing.
But China should be on everyone’s radar more so. Ever since President Xi Jinping was elevated to the paramount leader of China in 2013, he has put the country on a trajectory to reclaim its historical prominence as the global power. By most estimates, the size of China’s economy will surpass that of the U.S. by the end of this decade. In August, The Economist wrote that China’s “dazzling tech industry could also be the foundation for a challenge to American supremacy.”
We spoke with Jame DiBiasio, founder of DigFin (@Digfin), a media brand and content agency based in Hong Kong, about how China’s market is evolving. Jame has worked as a financial journalist and author in Asia since 1997 and is the founding editor of AsianInvestor magazine. (DigFin and its parent company, AMTD Digital, was acquired by financial services conglomerate AMTD International in January.)
Jame DiBiasio, Founder of Digfin
Archie: What’s the environment like for fintechs in China right now?
Jame: The China technology industry is highly advanced, with a vast internal market to address. Domestic fintech companies such as Ant Group (the payments and fintech arm of Alibaba), WeChat Pay (a unit of Tencent, which also operates digital banks, digital insurers, and other fintechs) and Ping An (an insurance startup) have totally disrupted many aspects of finance in China. Chinese financial institutions such as top banks and insurers lost much of their retail business to these fintechs, and therefore have no choice but to partner with them. The fintech platforms use these financial institutions for their balance sheets. However, the situation is changing, as the government has been cracking down on what it perceives to be Big Tech companies run amok. These fintechs are now embedded in society but will have to operate more in line with government prerogatives, which is good news for traditional banks.
Archie: Are these regulatory changes hurting fintechs more than other sectors?
Jame: Fintech was the main driver of tech investment in China for the last decade, and regulators gave fintechs plenty of leeway to innovate and bring better service to consumers and small businesses. Since late 2020, this attitude has changed. The government now regards fintechs as overly powerful, even predatory; the benefits have been widely adopted so now it is time to actively regulate these companies. In China, other sectors have become more important for startups, such as electric vehicles and blockchain-related companies.
Archie: How is the transformation of China’s Greater Bay Area, or GBA, coming along?
Jame: The GBA integrates Hong Kong and Macau with nine cities in Guangdong Province, including Guangzhou and Shenzhen. The concept, led by the government, is to transform this area—home to over 100 million people—into an interlinked dynamo and create new economic and business opportunities. Technology is a central part of this vision – the GBA name is a direct reference to the San Francisco Bay area, but it includes other sectors. For overseas companies, large or small, the GBA will over time produce opportunities, but the rules around moving data, money, and people across these internal borders have yet to be finalized. In China, however, waiting for the final regulations is usually not a good idea. Local companies sense which way the policy winds are blowing and build businesses with this in mind, knowing they may have to adjust their model as regulation becomes clearer.
Archie: Why do you think so many U.S. startups are unable to gain traction in China?
Jame: The biggest challenge is similar to that in any other market: What’s your value proposition? China has thousands of super hard-working tech startups. They have amazing engineers and bold entrepreneurs. They have a big population that’s eager to try new things. And they have local regulations, business practices, and consumer tastes that are distinct. There are examples of U.S. tech companies that have succeeded in China, like Apple and Microsoft. But most fail because they fundamentally lack anything the Chinese market needs. Very niche businesses with good local relationships can thrive.
Archie: How important is it for an Asian fintech to have a local presence in China’s mainland or in Hong Kong to gain traction?
Jame: There is no way to operate in China without being in China. If the business proposition is to help Chinese companies operate overseas, they may find a receptive audience. But business in China usually hinges on personal relationships and trust. It’s unlikely you will succeed without being on the ground and understanding the companies you want to do business with.
Archie: Does DigFIn help startups get more visibility in Asia?
Jame: DigFin focuses on digital finance, fintech, and digital assets. Our audience is finance and fintech professionals, mostly in Hong Kong and Singapore. We profile many companies, both startups and financial incumbents, from around the region including China. Our strength is helping companies with marketing and storytelling to these markets, rather than to mainland China audiences.
Check out DigFin here.