Daily Management Review

Asia surpassed North America in fintech investments


08/24/2016


Asian fintech sector for the first time surpassed the North American in terms of attracting investment. Asian companies, of which 90% were Chinese, attracted nearly $ 10 billion during seven months, while North American companies made just half of the sum.



During seven months of 2016, Asian fintech companies attracted investment of $ 9.6 billion - twice as much as the North American ($ 4.6 billion), writes the Financial Times, citing data from consulting firm Accenture. The Asian sector, 90% of which is presented by Chinese companies, for the first time outflanked its North American competitors.

In 2010, North American fintech startups gathered 15 times more money than Asian did. Last year, volume of investments attracted by North American companies reached a peak of $ 14.8 billion, while Asia attracted almost than three times less. In 2016, according to Accenture’s predictions, figures for North America will be halved.

North American fintech reduced investment partly due to a scandal over the US leader of p2p-lending Lending Club, says the FT. Last year, Jefferies Group investment bank took $ 22 million of loans through Lending Club. The bank received subprime loans, yet the buyer declaration did not stipulate this. In addition, one of Lending Club’s employees changed date of issue of 361 loans. As a result, watchdogs launched an investigation began, and the company’s shares plummeted in price. 

The biggest part of investments went to the Chinese fintech sector. The funds came not from global investors, but from the state, which supported a small number of the largest financial and Internet companies. For example, Ant Financial, a subsidiary of Alibaba Group which manages the country's largest payment platform Alipay and several other financial services, in April attracted record $ 4.5 billion from sovereign wealth fund China Investment Corp, China Construction Bank Trust, Primavera Capital Group investment company and the country’s largest insurance company China Life.

Over the past few years, Chinese financial technology sector experienced aggressive growth, noted consulting company McKinsey in their study. According to the company, China now is the world leader by number of users and volume of the market. By the end of last year, the Chinese fintech market, reigned by payments sector, exceeded 12 trillion yuan ($ 1.8 trillion).

This increase is obliged to four main factors, explains McKinsey. Firstly, the government openly supports the segment. In 2013, People's Bank of China supported technology companies and encouraged them to focus on provision of financial services on the Internet. Secondly, China has a well-developed online trading sector; internet shopping there makes more than a third of the population. Third, Chinese like integrated financial services. Fourth, the company said, high profitability of banks created a culture that is not afraid to experiment, which is generally good for investment in digital services.

Such an aggressive growth will inevitably slow down, say McKinsey analysts. In their view, the Chinese financial and technological players will fight with each other in the near future, which will eventually lead to consolidation. The regulatory framework will be changed to span new companies and products, and their development will be more orderly.

source: ft.com, mckinsey.com






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