Disruption and Connection: Cracking the Myths of China Internet Finance


Innovation in China’s has led to an Internet finance industry that has developed rapidly over the recent years, By the end of 2020, the overall market size of China Internet finance had reached almost 20% of GDP, in many key aspects being leaders around the globe, such as the number of users and the addressable market size.

Small businesses in the Fintech industry with game-changing innovative revenue and business models and solutions are coming up every from all sectors in the china economy.

People’s normal way of life is also being influenced by Internet finance in so many ways from how they spend and where banking, for example, is no longer a place they go but what they do.

This rise of Internet finance in China is linked to the following:

1. Open, supportive regulatory environment hence conducive laws

2. Highly developed E-Commerce business ecosystem with companies such as Alibaba, Internet economy has taken up 7% of China’s GDP (verses 4 to 5% for the US, Japan, and Germany),

3. Demand for inclusive finance, which is not satisfied effectively yet because of the many unbanked citizens, due to historical protection and strict regulation, traditional players are moving slowly with a continuing structural mismatch between supply and demand. This generates a very uncompetitive environment.

4. The trial-and-error capability built upon the long-term high profitability of traditional

banking industry.

Having many market opportunities, market players from different industries have All come into the Internet finance industry hence bringing huge potential.

There are three categories of leading players:

1. Internet attackers- They offer innovative idea/product localization

2. Traditional financial institutions- Have a foundation of strategic partnerships

 and physical branches

3. Non-financial core companies- They have a low cost of acquiring customers with huge

offline traffic.

 In the near future, there is a lot of potential, the following opportunities are some of those that will be generated alongside the development and maturity of the internet finance market

a.       1. Mobile payment

b.      2. wealth management

c.       3. Online consumer finance

d.      4. SME, Business to business Internet finance

 Players in the industry should get into the opportunity faster and boldly, and strengthen their core competencies and capabilities to rhyme the trends in the market and ecosystem.

Banks are moving to partner with others, mostly Internet companies, to form synergy and to catch up with the internet finance development.

We also have risks and uncertainties that need attention and industry players navigate this blue ocean. These include:

a.       1. Consumer irrationality

b.       2. Product defects

c.      3.  Fraudulent activity

d.      4. Implicit credit risk

e.       5.  Liquidity risk.

China’s regulatory authorities are determined to strengthen and bolster the management of internet finance, aiming at promoting the establishment and development of good market dynamics and models and the conducive development of the industry.

China’s internet finance industry will most probably embrace more competition and further industry integration, with mergers and acquisitions both vertical and horizontal with banks merging with companies mostly in the internet finance space, this will mean best products and offerings win through selection and elimination in the market by users.

The players, regardless of which industry they are in, must further improve their core competencies in order to survive in the competitive landscape and achieve sustainable growth into the future.

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