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Wealth-management products should grow rapidly in 2018. The range of online investment options is expanding, and customers are responding enthusiastically. A fth of Chinese adults still have no bank account; with yields on bank deposits low and the mainland China stock market notoriously volatile, many are likely to leapfrog that stage and go straight to wealth management.

«As more consumers own smartphones, fintech will grow»

One factor that’s helped fintech’s rapid ascent in China is the extent of smartphone penetration. Around 60 percent of Chinese people owns a smartphone: not necessarily an Apple or Android product, but a local model – Huawei or Xiaomi or Oppo. But although Chinese smartphone ownership is on a par with Germany’s and higher than that of Japan or France, it still trails South Korea’s by a considerable margin. As smartphone ownership continues to grow, so too will the market for fintech products.

And in 2018, those products will cover a wider range of financial services. Fintech firms are now looking not only to disrupt banking, but to compete with insurers and property companies too. Alibaba is expanding into housing rentals, allowing customers to undertake every stage of the process through the company’s apps. Meanwhile, Tencent has just received a license to start an insurance company.

Consumer attitudes are contributing to the fintech boom. Surveys show that Chinese consumers are more relaxed about the use of personal data than their Western counterparts.
This facilitates the monetization of information by fintech companies, making their business models more viable – especially as fierce competition is keeping transaction fees low.

«Chinese authorities content to let fintech competition play out»

Another supportive aspect is the ready availability of credit for fledgling fintech firms. Lots of venture-capital companies are ready and willing to invest, and abundant liquidity means that start-ups can thrive. This has intensified the competition in this area, which will leave the eventual victors in great shape.

I expect the regulatory environment to remain benign in 2018. Although there has been some intervention to stamp out malpractice in peer-to-peer lending, the Chinese authorities seem generally content to let competition play out in fintech – a positive attitude that may reflect China’s global lead in this area.

And that global lead looks set to continue. The Chinese fintech giants are now expanding their operations overseas. Alibaba has established joint ventures in Hong Kong and Indonesia, and is investing in India, South Korea and the US. It’s also setting up a global research academy, with labs in Beijing, Hangzhou, the U.S., Russia, Israel and Singapore. Meanwhile, Tencent has been investing in Indian e-commerce and building partnerships in Thailand, South Africa and Europe.

As 2018 unfolds, we’re increasingly likely to associate fintech not with Silicon Valley, but with Beijing, Shenzhen and Hangzhou.

 Brett Diment is Aberdeen Standard's head of global emerging market debt. The portfolio manager joined Aberdeen Asset Management in 2005 through the firm's acquisition of Deutsche Asset Management's fixed income arm in London and Philadelphia. Diment has been researching emerging markets since 1995, and began working at Deutsche in 1991. He is based in London.