Chinese financial technology firms have matured under a favourable domestic policy regime with very different standards compared with other markets. Whether or not these companies can adapt successfully abroad will shape the development of Asia’s financial and payments infrastructure.
Within China, third party payment systems have grown considerably, anchored by established Chinese technology companies. Baidu, Alibaba and Tencent are the most prominent examples of local technology companies leveraging their data products to provide financial services to businesses and retail consumers. Mobile payments via their ewallet products such as WeChat and AliPay account for nearly 90% of the local market.
As domestic markets become saturated, Chinese fintech firms are beginning to venture abroad. The fintech and mobile payments arena in southeast Asia may play host to a proxy battleground between Chinese tech giants and local companies.
Close geographical proximity combined with significant inbound Chinese tourism, widespread mobile connectivity and a sizeable demographic of unbanked and underbanked make Southeast Asia a lucrative opportunity for China’s payment providers. In Indonesia alone, it is estimated that the value of mobile payments in 2020 will exceed $15bn.
Chinese innovations are seemingly well-suited to being re-applied to southeast Asia’s developing countries. Yet Chinese players must contend with local start-ups from the fields of ecommerce, internet gaming and ride-hailing services that have moved into this space. The competitiveness and popularity of Chinese mobile payment providers in southeast Asia will depend on their capacity to extend service offerings beyond ewallets holding stores of value.
For instance, banking services such as the provision of credit and insurance will be differentiating factors. Already, companies and consortia involving Ali Baba’s Ant Finance, Bytedance, Tencent and Ping An among others, have attained or applied for virtual banking licenses in Hong Kong and Singapore. Chinese firms could exploit their experience in predictive credit modelling from social media usage and alternative data sources.
However, these sophisticated value-adds are predicated on firms having access to copious amounts of personal and big data. Even the People’s Bank of China’s forthcoming digital currency is intended to provide ‘controllable anonymity’ among retail payments.
It is uncertain if these prerequisites and policy goals would be palatable and replicable for Chinese companies operating under alternative regulatory regimes. Businesses, regulators and consumers alike will have to grapple with divergent notions of cybersecurity, data privacy and accountability.