More than 90% of banking transactions in China have moved online, according to the industry regulator, as financial technology continues to develop rapidly in the country.
Speaking at the recent Singapore Fintech Festival, Guo Shuqing, chairman of the China Banking and Insurance Regulatory Commission, said Covid-19 has accelerated the pace of fintech development, with financial institutions rolling out more online platforms to provide basic financial services during the health crisis. And this has contributed to the economy's quick recovery from the ravages of the pandemic.
Digital credit has benefited micro and small enterprises, the self-employed and farmers. “Banks use big data and achieve smart risk management, reducing reliance on collateral and making loans more accessible,” Guo says.
By the end of October this year, the number of micro and small businesses with banking credit has reached 27 million. Loans for these firms and self-employed individuals grew by over 30% year-on-year, while loans to farmers rose 14.3% over the same period.
In the insurance space, fintech services have resulted in wider coverage and better accessibility and efficiency. In the first half of this year, China’s online life insurers’ premium rose 12.2% y-o-y while online property insurance companies’ premium increased 44.2%, Guo says.
However, fintech’s rapid development has not been always smooth and issues have emerged. “The development of our laws, rules and regulations on fintech was just like feeling the stones while crossing the river – we met some problems, learnt the lessons and gained experiences,” he says.
Default cases
Guo cites the case of peer-to-peer (P2P) lending as an example. “It was originally supposed to be just information intermediary. However, in practice, many P2P platforms engaged in lending and wealth management,” Guo says.
The industry had grown rapidly in the past few years. “Over the past 14 years, the total number of P2P platforms reached 10,000 in China. At the peak, over 5,000 companies were operating at the same time. The annual trading volume was about three trillion yuan (US$459 billion),” Guo says.
However, default cases were happening so frequently that regulators had to call a stop to the business. “The non-performing loans and losses were very high,” he says, noting that by November, all P2P platforms in China had been closed down.
Other big issues facing the fintech industry are cybersecurity and the abuse of personal data. “Some tech companies use their market advantage to improperly collect, use and even sell user data without the users’ authorization. The Chinese government has made efforts to plug the holes,” Guo says.
Laws that protect personal information has been drafted and financial data security regulation is being discussed by regulators.
“Facing the rapid growth of fintech, we will adopt a positive and prudent approach. We will encourage innovation while enhancing risk control in order to address new problems and challenges,” Guo says.
