U.S. lenders: take note of these staggering Chinese fintech stats

Below are some eye-popping stats about Fintech in China from last week’s Economist.

In mortgage and other U.S. consumer lending, I still hear people scoff at the idea that startups or big firms like Amazon could come along and gobble up our market share. It’s time for those people to wake up.

Even if it isn’t U.S. startups or incumbents, some of the Chinese firms are starting to expand globally. So traditional lending firms either need to look to buy startups to acquire technology, or partner with fintech providers that can redo their technology quickly.

This is a commonly known fact in the mortgage space, but still, there are a lot of firms that think good old fashioned customer service and branch networks delivering a personal touch will win the day over technology.

Wrong. New lending technology IS the customer service. The phone IS the branch.

This isn’t to say lender just dump their experienced salesforces and branch networks. But if you’re a mortgage leader and you haven’t started working on a hybrid model, you’re already way behind.

-The largest Chinese fintech, Ant Financial is Alibaba’s financial arm which was spun out in 2014, valued at about $60b, on par with UBS, Switzerland’s largest bank.

-China has 700 million internet users, more than any other country. 95% of these users go online using mobile devices.

-425m Chinese, or 65% of all mobile users use their phones as wallets. China’s ministry of industry and information technology says this is the world’s highest penetration rate

-Mobile payments were 38 trillion yuan ($5.5 trillion) in 2016, up from almost zero five years earlier, and more than 50 times the size of the American market.

-China’s two biggest e-commerce portals, Alibaba and JD.com, lend small amounts (typically less than 10,000 yuan) and Alibaba says 60% of borrowers in this category had never used a credit card.

-Chinese peer to peer (P2P) lending firms exploded from 214 in 2011 to 3,000 in 2015, and one third of them have already shut down.

-Outstanding P2P loans increased 28 times from 2014 to today: from 30 billion to 850 billion yuan.

-Chinese P2P firms are almost entirely funded by about 4 million people, up by a third over the past year.

-In money management, a fund Alibaba launched in 2013 let people earn interest on cash in their e-commerce accounts by investing in money market and gave rates about 3% higher than banks offered with minimal risk because their cash was still ultimately with banks.

-This fund attracted 185m customers within 18 months, giving it 600 billion yuan of assets under management.

-Minimums to start investing in Chines fintech advisors are low: all it takes is a smartphone and an initial buy-in of as little as 1 yuan. WeChat has added 800 million active accounts, and Ant has added 400 million accounts.

-All outstanding P2P credit is 0.8% of total Chinese bank loans. Credit provided by the e-commerce firms adds up to even less. Earnings from mobile payments amount to barely 2% of bank revenues.

-Estimates call for Fintechs to grab less than a twentieth of banks’ business by 2020, but even this seemingly small number is about 1 trillion yuan (or $145b) in revenues.

Fintech In China: The Age Of The Appacus