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Fintech will increasingly be associated with Beijing, Shenzhen and Hangzhou in 2018 instead of Silicon Valley, Aberdeen Standard's Brett Diment details in an exclusive contribution for finews.asia.

Every time I’m in Beijing, I always notice the street vendors selling their wares outside the Forbidden City. The food typically only costs a couple of yuan, yet, the last time I was there,
I realized that the ladies selling them were happy to take payment on their phones using the Alipay app.

I don’t know what they do with the proceeds. But it’s increasingly likely the funds will have been deposited into a money-market fund or another wealth-management product – all with a few swipes of a smartphone. Today, most Chinese people take financial technology – fintech – in their stride. In the year ahead, it will become an even more integral part of daily life.

China’s fintech industry has come very far, very fast. Online payment provides the clearest example. These days, if you want to go for a meal, you can order and pay on your phone, turn up to the restaurant at the appointed hour and enjoy your dinner – without ever touching physical money or menus. The Chinese online-payment industry already accounts for around half of global transactions. Alipay, operated by Alibaba’s financial arm, is the market leader.

«Chinese fintech is more than online payments»

But Tencent’s Tenpay has been catching up fast. Tenpay’s stroke of genius was to allow its users to send electronic hongbao – the red envelopes of money traditionally given as a Chinese New Year gift. Some 16 million online hongbao were sent in 2014 – rising to a billion in 2015. This helped Tenpay’s share of the online-payment market to reach around 40 percent in just three years. Tenpay’s rapid rise shows that we shouldn’t rush to write o the smaller payment players – so we could see surprises here in 2018.

But there’s much more to fintech than online payment. Chinese consumers are increasingly using mobile technology to borrow and invest. And alongside peer-to-peer lending, business-to-business finance is now taking off, with fintech firms offering cash and liquidity management for companies – filling gaps left by the cautious state-owned banks. Integration between online payment systems and wealth-management products is increasing – which is why these sausage-sellers could transform their earnings into investments through their phones.