China’s rapidly developing fintech scene and the global influence of their tech companies is undoubtedly having an effect on the country and the rest of the world. In this exclusive Q&A, bobsguide speaks to Zennon Kapron, Founder of Kapronasia, and speaker at Innotribe’s session on ‘Killer Platforms: The Chinese road to platform disruption’ at Sibos 2015, about the growth of China and why Western financial institutions should watch out for the threat posed by Chinese tech companies.
Can you give delegates any key insights into the Innotribe session you are speaking at Sibos this year?
Fintech over the past few years has become sexy again with an incredibly amount of funding and focus being put into the market. Companies like TransferWise and Lending Club are changing the way people make payments and invest, but largely, the impact of these solutions are limited. Sure a few million people use them, but they are not about to completely upend banking as we know it.
China is a different story. China is all about Big Fintech. As opposed to small upstarts that are slowly disrupting an industry, in China, it is the tech giants that are changing the way a billion people bank. Although the technology behind their platforms is nothing new, the way that they are bringing it together on to platforms and leveraging big data is completely changing the way that they interact with customers. During the session we’ll be talking about some of these changes in mindset and what has enabled the change.
Can you give a brief summary of China’s financial history and where the country stands today?
Since the great opening in the late 70s, China has been on a path of economic development that has only been matched by its ambitious for itself. The financial industry has been a big part of that development and a key enabler for the last 3 decades of economic reform and growth, but the industry, until very recently, was very highly regulated, which limited its growth and development.
This has changed. Over the past decade, the industry has gone through dramatic reforms and innovation that make it almost unrecognisable to what we were familiar with in the past. Foreign banks, margin trading, financial futures, online payments – none of this existed 10 years ago, but today it’s a part of the market.
How have Chinese tech companies grown as financial players over the last few years?
China’s tech companies initially moved into the industry through their payments platforms. Alipay continued to build on this by partnering with an asset manager to create an online finance platform that made it very easy for users to get a competitive return on money that might just be sitting dormant on their online payment account.
Eventually online finance paved the way for the possibility of a greater financial integration which is what we’re seeing this year with both Tencent and Ant Financial (part of Alibaba) receiving their private banking licenses and starting to push out a full suite of financial products.
Why are Chinese tech companies posing such a threat to Western financial institutions?
China’s big tech are coming to the financial industry with a keen understanding of their consumer, a digital and agile infrastructure and a proven track record in leveraging big data. The west is talking about digital banking, China is doing it.
How will China’s decision to take their tech companies global, affect both China and the rest of the world?
China’s tech companies have a big home market to play in for the moment. Eventually though, as much as regulations will allow, they will start to take their show on the road and will very quickly grab market share in other markets.
What will it mean for Chinese tech companies if authorities gain more control over the internet in the country and the ability to monitor company networks and data?
The concept of privacy in China is fleeting at best. Right now the government likely already has connections into nearly all the tech companies in China and have a clear understanding of their business models and approach to the market.
The relationship between the government and tech companies is also very symbiotic; the launch of private banks wouldn’t have been possible had regulators not allowed. They are both invested in the success of the financial industry.
What about regulation, how is this affecting the growth of tech companies in China?
Regulations so far have been very favourable for financial innovation and fintech in general, but recently regulators have shown that there are limits. Potential regulations being discussed now would regulate the P2P lending industry, which is welcomed and beneficial, but may also regulate online payments in an adverse way. How this all plays out, remains to be seen.
Hear more from Zennon Kapron at Innotribe’s ‘Killer Platforms: The Chinese road to platform disruption’ at 3.15pm on Monday 12th October.