行业分析报告-中国金融科技的崛起

word文档可自由复制编辑word文档可自由复制编辑efTheRiseofChinaFinech

MancySun+8522978-6072manc.sun@GoldmanSachs(Asia)L.L.C.Payment:TheEcosystemGatewayhsegeyrs,wd.rstdtloDdgndnoelrdegmrdrsoytaefaeogiegsd.hrs’stylgdepe,twtse.nertfrsneef,esnesrsdrddeefctsteealrrs’p

PiyushMubayi+8522978-1677piyush.mubayi@GoldmanSachs(Asia)L.L.C.TianLu,CFA+8522978-0748tian.lu@GoldmanSachs(Asia)L.L.C.StanleyTian+8522978-1945stanle.tian@GoldmanSachs(Asia)L.L.C.GoldmanSahsdoesandseekstodobusinesswithcompaniesceredinitsresearhreports.saresult,iestorsshouldbearethatthefirmmyheaconflictofinterestthatcouldaecttheobjectivityofthisreport.Iestorsshouldconsiderthisreportasonlyasingleactorinmakingtheiriestmentdecision.oregCcertificationandotherimportantdisclosures,seetheDisclosureAppendix,orgoto/researh/hedge.html.Analstsempledynon-USafiliatesarenotregistered/qualifedasresearhanalstswithFINRAinthe..TheGoldmanSachsGroup,Inc.word文档可自由复制编辑efcttsPofolioMg’sumy 4izingheddssblemr:Unppdconsmrdmnd yshpingnds:Ingion yshpingnds:gulion yshpingnds:Innionl Thid-pypmn:Thecntsteofpl ypmntchnnlsbypeofnscion:,CCnd owdosito?Tdiionlshidp owdohymemon?TdiionlsThidp Enblsofgoh temordntgeindiitiztinofny estuctuethtiscosrtocshscds Uniueinfsuctuest-up Poliftionf-commce/socilpltfomsnblslgowth Impoigseofusewihchnolgyncmnt Undsndigheyplsndcomiielndscpe lipy Tnpy izingheddssblemr ydbsforfuue:Monizion ydbsforfuue:guloy ydbsforfuue:ecompiinndM&A ppndix isclosuepndix onibuinguho:amschnid,Ph.;ndwons;tunoiTnk;raoumn,;nkhi;TinoYu;bt.ooujdi;hinoi;Piippazzn,;ichdMnl;TmthyMo,;ndwTiln;liotCmplissn;thP.Ty,;ugocott-Gll;RicdRmsdn;njOmhn;nNsh,;dmotchkiss;nilPowl;ThmsWg;uog,Ph.;Eliehng,onldung,;uyi;thineiu;Michlehng;nitaYiudfhinAcronymbter:V:TotlPmntlu,2:BusinsstoCnsum,2:onsurtoons,2:BusinsstoBusnss,QRcode:Qicksponsecod,PO:PoitofleThisistheltstpotfomouruueofinnceseis,wheweploehowTchischgigheshpeofnnc.eltdepotsblowrisitourGpotlforhefullcogPmntEcostms,ug,ThesocilztonoffinncM15dfiningte`WWePinheNcdM1Wchaidosummyfmheuhorh>>word文档可自由复制编辑iaihinnubsI-YMTn Thid-patypamentalueinhinagrewmorethan74Xfrom2010to2016.bout16%ofthatisconsumpton-related.56%ispeer-to-peertransfer.(p.22-29)IINMIT

ITI$4bn $156bnTotalintenetloanbalanceoutstandinginhinagrewmorethan36Xfrom2013to2016.utincontetitissmallcomparedtohina’sgiganticfinancialsstem,atonly0.8%oftotalsocialfinancing.(p.13)IEILIIlibabamentionedthewod‘ecosstem’95timesin

vteompns(non-tteownd)own%ofthenwntzdnghoueforonnepmnt.

>60%their2016annualreport.imilarmentionsareobseredfromotherleadingFinechplaersingn,encent,J,aiduetc.Forcontet,ICmentionedtheord‘Finech’or‘Internet’22times.(p.13)

helargestshareholdersbesidestheentralankandthetatedministratonofForeignchangearentFinancial(9.61%)andencent(9.61%).hiscomparestohina’seistingbasicinfrastructur,hicharestate-oned.(p.16)IINLIN

YIHR28hineseconsumerscanusetheirfaoitethid-patypamentmethodoutsideofhinaatphsicalretailersin28countriesandregions.(lipa:28;28enpa:15).(p.18)

Thid-patypamentdoneiamobiledeicesaccountfor75%ofthetotalpamentalue.Forcontet,20%oftheSe-commercepamentisiamobiledeices.(p.23)

75%S

SINI40%

etailconsumptionpaidiathid-patypamentcompaniesisgroingandnowcomprise40%ofretail.(S:third-party7%;totalcashless75%by2015).Weepectthistoriseto68%by2020.(p.55-56)

Inhina,traditionalbankcards’aeagetansactionsizeof$930isalmost10Xlargerthanthird-partypament’saeragetransactionsieof$88.(p.24)

0xRE3.4bn

hereareintotal3.4bnthid-patypamentaccountsinhina(2016).(p.47)

MIIINFHnitual‘edpackets’(hina’straditionalcash-filledredenelopethatpeoplegieeachotherduringfestials)ereechangediaWehtayonhineseewear’seugst7,217 hinugst7,217 hin:ehoooldncsoalnetnteeach 3

Tenpa:600mn(ec2016)

Forcontet,apalhas197mnusersglobally(ec2016)

in2017.(p.43)word文档可自由复制编辑osWhyedthsreport?Seefiera-worldcasestudiesforpaymentsnpages25-26,43,48,53cnFineheoystm:Pges6-7Listofeyplayes:Pge9ToaladrsablemarketTrnd1:InegationweEcsytemosed-opTrnd2:gulatonProgrwthRskaaentPriateapialparticpaton

Regulatorycangesandnwtechnoogisarere-shapingCina’sbankingactivitis.Thepaceandmgnitudeofthedevelopmentisvastytsetfe.Agroupofhybrdtech/fnancecmpaies,uchasAntFncial,Tencet,JDandingAnemdtetfsl,maglsmoconvenientadaccessibleorconsmers.ThishasresltedinChnaeapfroggingfromademsgyreliedoncash,tocashlessornaspaying,borrwingadnvesting,allhrughheirsmtphones.Weexpectthechangestoeret0a,hwentrantsemergingandnwprofitpolsbeingcreated.Withinthisreport–ourfirstinars–eytemshuntappedosumerdemad,thenexplainthreeygstinvestorsneedtounderstandboutheChaFinTechspcebeforelooingatinividalbusnesslies,suchasthehihngration,evoingregulatnsandinternationalzatio.Lastly,wefocusonthird-partypayment,anareawiththemstinovationssofar,thruh‘real-world’casesandadeepdveintousinssmodel.nour,mtsalyomors,dheeseinedthestrongestfootholdsinChina.UnappedconsumerdemanddivesFinTechopotuniies:Historically,tetraditionalnksinhinafocusedoreonservinghestate-ownedenterprises,leavingthefinanlsfmsdE’sunderserved.AsChina’seconomysws,conumerspendnghasbecomeivoltotransfomtheecomythatwasheavilyreliantnnvestment.Smennovaors,bforetheyenterthefinancialsector,dytazemrdMEs)userbaseintheirorebusinesss.Tonameafew:AntFinancial%dy,’stmmem)andTencent(echgianthoownshina’smstpoularmessengerppWeChat),rPingAn(China’slrgestnon-staeownedfnacialcopanywithafousnconumer).Withthehelpoftehnoogyandheiniiallyspportivereguatoryenvironment,theinovatorswereabletotapintoandexpandtheirexistinguserbse,andcapturetheuiqueopportnitytofChneseconsumers.ehiglihtteseaddressablemarkets:Payment:US$4.6trillionin2020Eincnsumpion-elaedhid-paypaymentvalue,m9nn.eyverswouldbee-commercegrowthandincreasingpnetrationinoflineretailerssymtsLending:US$764billionin2020Einloanbalancefrmnon-traditionalplayerstsdmreo,m6nn.myfeemtmsmms0)–consumercreditisonly7%ofGDPvs2%intheUSin2016(excludingmortgages).Investing:US$11.9trillionin2020Einfinancialassetundermanagemen,from3nn.eetenovationineassetmanagementindutryisstilatanearlystage–mchofitishapeningwitinordrivenbyheincmbensthemselves.Soitoudbeooearlytodfinewhatison-bankadwhatisot.KeytrendsthatareshapingtheChinaFinTechEcosstemIntegration:Afewhybridtech/financecompanisedomieebyownngheeniesupplychaindeecosystemaroundit.Othersaretryingtoenterastheystrivetocloseheoopfhirn.he‘inegaion’minstsweswthrstrategy,competitonndproitabiiy.egulaion:Regulationplaysavitalrolendetrminngthefutureevoluton.InChnaitissillpo-owh,butgettingmoresphisticatediniskmanagemen/cusomerpoecion.Privatecapitalhasuncharacteristicallyhihnnenfucurebuld-utvsotherinustres.Wewillpayparticularattentionoheevolvingreguationsanddnamicbalanengusdd:erMs

nnonal:ehsdoadsrarbase.Localcnditons–lecyinfrastructure,regulatin,deograpicandulturenorms–illictatetheadptio.WeontoutlwhngigfruitlveragingChineseouist)deysinexportingheirtecnolgystandrds(QRcde).t:leMtby2Trd-artyant

ntnLnng

stnt*(tratnlnaalps)$4.6trn

SMEloan,24

osercedi,48bn

.Cnsumioralatedpaentalue Lanalanceutstanding Fiancialssetneraagementorsm,etdalasetmaesaeensncurngIbsdsrcesdepgnesuoncns.Wesegatcryrndeflmakttcuenrdaladn-dnles.:,luf,,,,ettnf,ae,nlItThirdparyayent:pamntpcesedbynn-bnkfimsThemaketeaed:$1nanalfeeoolThirdparyayentinasgnotnlycas;Seourcaestdynpge20.

Ourtakeawaysforthird-partypaymentEnablesofowh:Thecmbinatonof1)technolgy2)digiizatinofmney3)owfees4)uniqueinfrastructureset-up5)prnfmmeandsocialplatfrmallowedChinatoleapfrogfomcashtocshless,orevens.etsedeesshifingrapidly.Newtechnoogyisalogeenmstestoricallyurpenetratedbybanks.$11bnannualconsumption-relatedrevenue/feespoltobecreatedby2020E:ImmediaterevenueopporunitiesomeomB2Cpayments,wichisjustasmallnfelment.izationiniiativesforothertransactions(mainlyC2C)arestillinheearlystages.Directprofitabilityightnotbetheigplayers’toppriority,aspaymentisoftenvidseyorrDisuporsandcompeiivelandscape:40%oftheretailconumpontdayinhinaseaym.yandTepaynwdoinateeehmarketshare,butszeablepayersfromoherindustriesarejoinigterace.KeydebaesforfureMoneizaion:Directprofitsfrompaymetarethinnhina,duetolwfees,hihompetitonadmarketing.,mentssayereg’ystembygrantingtargetedaccesstousers,andprofitbilityremainssecondary.Futuremonetiztionilllielycomefromtargetedadvertising,consumerfnancingandwalthmanagment.egulaion:Thereisaninceasingneedorregulatorsomonitorthemoneyflowaedecosystemsandpaymentisthestartingpoint.However,idfmpyghisactivity,gulatorsareworkingithhepaymentompaniesashat’swheretetechnolgyknow-owies.Tiscreatesunqueaccessforelnettionofincialinfrastructure.Feecompetition/M&A:etempnoydtoemoeM&snemspace,asplayersinadjacentindustriesscramblefrmtsoern,dthemselvescatchupininvation.word文档可自由复制编辑FinTechEcosystem-Chinavs.USandJapan INCUMBENTS

DISRUPTORS1

OTHERDISRUPTORS

INCUMBENTS

DISRUPTORS INCUMBENTS DISRUPTORSDIRECTBANKDEBITTRANSFERSYSTEMYMENTMOBILEYMENTYMENTSERVICEPROVIDER

WeChatPayAlipay QQWallet

1PingAnE-wallet

3JDPay

Baiduallet

4FINANCINGPERSONALLENDINGFINANCINGSMELENDINGCROWD-FUNDING5

Bankssuchas:ICBCCCBBOCABCBoComAssetmgmtcompaniessuchas:ICBCCredit

AntCheckLater1LoanissuedbyMYbank,(formerAntMicroLoan)Antsdaq

1WeilidaithroughWeBankenpayMicroLoanencentGongyi

2LuP2.com2Lufax1PingAnCrowdfunding2

3JDBaitiaogi3g3D3

BaiduUmoneyBaiduLoanBaiduBaizhong

41a4

U51.com

Bankssuchas:PnBoACitigroupellsFargoAssetmgmtcompaniessuchas:

Bankssuchas:Assetmgmtcompaniessuchas:SVING/INVESTMENTONLINESSVING/INVESTMENTONLINE5ASSETMANAGEMENTONLINE-ONYBANK

SuisseAssetMgmtEFundMgmtChinaAssetMgmtInsurancecompaniessuchas:ChinaLife

AntFortune1u’eBao1ianhongAssetManagementAntFortune1MYbank

LicaitongLicaitong1WeBank

LufaxL

Dh)JDXiaojinkuau1

BaiduFinancialSupermarketBaiduh 1

99BillealthMgmt499BillealthMgmt(快钱理财)

BlackRockFidelityCharlesSchwabInsurancecompaniessuchas:MetLife

NomuraDaiwaNikkoAMInsurancecompaniessuchas:Dai-ichiLifeNipponLifeCLOUDCOMPUTING

AntFinancialCloud

encentCloud

PingAnCloud

J

BaiduFinancialCloud

1andaCloudCompanyOTHERSPERSONAL6CREDITSCORINGOTHERSONLINE-ONYINSURANCECOMANY

PersonalCreditRating:OfficialpersonalcreditrecordofPBOC

ZhimaCredit

encentCreditBureau1ZhongAnOnlineP&C

ie

3i)

1Otherinsurancecompanies

Personalcreditratingsuchas:NTE:.Notwhollywned.2.WhollywnedyLuaxHolding.3.WhollywnedyJDFinance.4.Whollywnedy99B.5.Atcuentstae,mostoftheonlinesving/assetmanaementplatomsinChinaaedistibuorsinseadofassetmanaers,eceptorTianhongAssetManaement,whohasamuualfundlicense.6.ZhimaCedit,encentCeditandQianhaiCedit,alongwith5othercompanies,eeselecedyPBOCaspilotcompanies.PleaseeerotheAppendixorfutherdetails.

Source:Companydata,compiledbyGoldmanSachsGlobalInvestmentResearchword文档可自由复制编辑ugst7,217

utureofinnce:heiseofhinainech10thingsthatmaysurpriseyou…ysneaheethghyinegaedbusinessmolsandclosed-loopecosystem,bothiththerofflinebusnesses,andalongtheeniefinancialspplychain,wningpaymenttogdhmmtdncreditscoring.Afewbighybridempseomiee.y,sneteyconcentratedononeorjustafewparticularcorebusinessis(suhasVsaandMasterCard,ordisptorslikePayPalandLendngCub).(p.2-13)Privatecapitalsaredoon(atleastpatof)henextgeneaionoffnancilinfasucu,whilehistoricallyostofhina’sexistingbasicinfrastrusedyenment.Forinstance,AntFinancialandTencenteachowns9.61%fWanglian(hina’snewcentralizedclearinghouseorallolinem.yreedth,utrelnkandteStateAdmiistrationofForeignExchange(34%cobined).(p.16)Thid-paypaymensinChinaaeeplacingcash,notonlybankcads,andarewidelyinsallticket-sizeddhyn.ssyitmmotdodeefemopersistentusesofcashreinstheurcseofsmallcketitems.eestimatethatabout%fheconsumpionin2016wasdoneviathirdpartypayments.(p.23-2)emsetycingthird-partypaymentsathom,teonrpaymentmethodabroa.Third-partypaymentsaeavailableatphysicalretailersinatleast28countriesforChinesetravelers.TheycanevenhaveVAT(value-addedtax)refundeddirectlytoheire-walletonthesamedynyldtmotUairportsandKoreanairports).(p.18)QRcodes,emletrrykfne,dominateseymsceneofthehinesewayoflife.thasmadesigificantprogressabroadtoo,asaccordingtoheSCMP,EMVcoamfmtmsydyAmericanExpress,Visa,Mdadadoptsitasanindustrystandardfttny.(p.24-25)nreemrs.6t,ty1tf3fmsat.Thelowceditcadpeneationbutexemelyhighdebitcadpeneaionsaeerdiitalpaymenttogrow.(p.39)16%oftheU$11.4trnthid-partypayentvalue(TPV)isconspion-elated–htsertcontribuorfrpaymentcmpanies,hencomparedwithC2Ctransactions(56%oftheTPVbutsuallyfreeofcharge).(p.9)Third-partypaymentfeesaremuchlornhnasotoheroun.Forinstance,Aipay/Tenpaychargesamerchant38-60bpsforreceivingmoneyfromacustome,whilePayPalcharges290bps+US$0.3.(p.38)Thenetpdforapilhd-paypntpocors1-04%pertransaction.Forcontext,PayPal’stds%n.ettmentprocessingisthin,unlsemtsotherchannesformnetiztionithneirecosystem.(p.33)eeenatleast40M&Adealsinthethird-partypaymentsectorssince201.eelymts,ty0fmedoeemt–tfeeeey0shatarenotalreadybeenboughtbyorodhaefromadjacentinustries.(p.64-65)oldmncsoalnetmnteeach 8word文档可自由复制编辑CiaFiTch-ylysAampleofopanisithxpouempy100%ntFnnl33%1 AbbaGoupTnp100%TnntChnaUMS60%ChnaUnonyBl96%WndaGoupngn-wt77%ngAnGoupCCN92%ChnaUnonyD100%DFnn40%2 Dom15% TnntChnanRLa31%LnooHodngsYfubo60%unngCommeGoup18%unngppneGoupUnonMobey100%QngdoHitlOneBofoo100%MndoFnnlvBduW100%BduItrliLufx 55%3 ngAnGoupndi 84% CdteHodngsbbaMoLon 100% ntFnnl 33%1 AbbaGoupMYbnk 30% ntFnnl 33%1 AbbaGoupWBnk 30% TnntDFnn40%2 DomBnDFnn40%2 DomBnBnk30%BduonCN33%LnooHodngsHongngCptlRnndDnongtnddChtdpdi15% TnntLufx

Ltong100%TnntLtong100%TnntDWthMgmt.100%DFnn40%2TntnFundDtn.100%tmonMhnGnenv.100%ChnahntsBnk

Olii/iOlii/itmTnhongtMgmt.51%ntFnnl33%1ntFotune100%ntFnnl33%155%3 AbbaGoup Dom 15% TnntrritriZhmaCdt100%ntFnnl33%1 AbbaGoupQnhiCdt100%ngAnGoupTnntCdt100%TnntKoaZhngn32%La31%LnooHodngsChnaChngnCdtnowyCdt15%TnghuaUnvtyOli-lyirZhongnOnne&C

16% ntFnnl 33%1 AbbaGoup12% Tnntoldncsoldncsoalnetnteeach 9lmtibbaCoud100%AbbaGoupTnntCoud100%TnntngnCoud100%ngAnGoupoud100%DomBduFnnlCoud100%BduPubiyidompnioe:hin:ehoougst7,217.Byaeee,sjectoeaoyaoa..Byaeee,sjectoeaoyaoa,aferJDhin:ehoougst7,217coee..%eyadcoeeoseaeto%sae.AlesaeasofJy.

Soce:Coayaa,coedyGoanSacsGoalIesetReseachword文档可自由复制编辑gee:drThirdparyayentTMy2E:onumiorelatdTP:U$46rnRvnefeepol:S1bnIntenetlndngTMby00E:rtmorgges)alace:S40SElonbaane:S24InvetingTMby22E:Finncialasetuderaaen:US119trn

Weseeundepeneaedmakesforundesevedconsumesinheecoebusinessesofadiionalfinancialsevices:paymen,lendingandnvesing…m:Wefocusnpamentintherestoftisreprt.WhilstweestimatethatheTPVofconupton-relatedthird-partypayentwillreachUS$4.6trnmb)by2020Efomrnmb)n6deannualrevenue/feepooltobeUS$11bn(Rmb75.8bn),wealsohghghttheimoranceofpayentservicestogaincusteraccountrelatonshpsaswllastransactiondata,hihinturnofferpaymentcopaniesopportniiestotapntonsumerlenngandinvestng.Ouranalysissbasedontefolloingkeyassumptis.1)y,%feconsumptionwouldbedymtcompanies,from40%in2016.ThisssumsthatChina’sdigitiztionofyy0samrlfSn.mstaddohn4stkS4es02-1Weseefurtherdownwardpressureontheteeinetw,nregulatorytihtenin,ntrductinfthenwclearinghouse,adorecompetitonfromplayersinotherindustriesyingoretpeeoawefaefsfrm.edesneLending:Weestimatethecnsumerlenngpporuniywillbedrivenbythe(sill)fastconsumptiongrowthaswellasthelareunderservedcohortincludingc.360mnrul,0mnt,mnesslsmefemners.Weforecastoalbalanceousandingofcnsercedit(excl.mortgages)towm4n)n6toU$1.9trnmb)in2020E,amogwhihinenetlending(ncl.P2Pandonsumerfnancefromnternetgiants)toincreasefromS0nm)toUS$480bn).China’sonsmercreditisigniicantlyderpnetratedat7%ofGDPvs20%intheUS.Inparticularweseeuntappedmarketin1)ubprime-orrowercashandconuptinloan;and2)mall-tcketconsutionloans.Thecoreofalendingbuinssistopricehecreditandliquidityr.eeledrditpricigtotraditinalndingservices.Howeverthisisyettobetestedovertmeandthroughcycles.Wealsobelievethat1)merfsmyemuhallerthanthevastnuberofdisrporswhomonetm;d2)Awin-inscenarioorincmbentsnddisruptorsismorelikelytanadisrupiveone,givenhenatureofumbersomepital,liqidityadgulatoryrequirementsofalendigusnessmaynotfittheaspiratonsofatechcompan.Inaditin,ealsoseeaUS$284bnTAMfruderservedSMEshrughinternetndingyInvesting:ethina’soalfinancialassetundermanagementshouldinceasemnormn.mnklhmanagemntprouctshichismoefas)n6oUS$11.9trnormnin2020E,drivenbyChinesehueholds’fastealthaccumutionaswellspotentialyigherwealthallocationtonancialssets.WeseeopprtunitiesforFnTechcmpniesin1)istributonoffinanialpoducts;and)Artificial-Intelligence-based(AI-based)ivestingadvisoryservices.Incumbentassetmangershavealsobeeninvestng/acquiingAIbasedrviceandexpandigolinedistrbutinchanelsandwesillseegreatunertaintyaroundfinalinvestingmrketstructure.t:ethsnfmy2EocharlfSn

t:eethempton-relatedthird-ymnteochmnyInceaseinnoncashtansactions2002-2016Sheofnn-ahtascinssa%ofttaltnatonsn06(-x)vsncaefInceaseinnoncashtansactions2002-2016

Consumtion-relaedthirdparyamentalue(Rmbrn)5%

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t:WeexpectconsumercreditbalancethroughinternetlendingtogrowfomlessthanRmb700bnin16ormnn4,00fGDP-CinasSandJapan% 0%1% % 1%

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Rmbbn2,000,00

osueriace(alyneretiats)PPplafomsritioalplyers% %

%

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haJan

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(alyans)01 02 03 204 05 0

0016 201E 201E 20E 0E:,l,I,,nsIt

:,,nhslInttt:srawealthmanagementAUMlikelytogrowwithfurtherwealthaccumulationHousehldwealthmanagemetssetUnder

t:,eeetotalAUMofintinsicMnaohmny2RmbrnManagementU)todisposableincomeratio

5

0ETtlUM PE&HFndoundus.3%9%

5%

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9

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Agroupofybridtech/financecompanieshaveemegedattheheartofChina’sfinancialindsy.Theinegaioncommencesathecoebusinesses(usuallynon-finance),andexendsoheeniefinancesupplychainfompaymentolendingowealthmanagement.WejuxtaposetheecoystemwiththatintheUSandJapan,examinethedifferences,brieflyexplainwhyandassessthelikelyfuturepath.OneofhemostimporantchaaceisticsinvesosneedoundsandaboutheChinaFinTechecosystemisthehighlevelofintegration,bohwihofflinebusinessesandalongtheentirefinancesupplyhain.Thecompaniswithearlysuccesshavebuiltadistinciveecosystemalongtheentirefinncesuplycain-andmoeimportantly–linkedtotheircoreluepropoitontoChneseconsumers.hisrangesfrmtechiantsAlibaba(BABA)/AntFinancial(anAlibaa;,nt.,mcBaidu(BIDU,tofinanialcnglomeratePingAn(2318.hk),ornelemWanda.ThisontrastswithirmsinthestlikeVisa)andMasterCard(MA),ordigitaldisruptorslikePayPal(PYP)andLendngClub()htsynertaparticularcorebusinessisandnooffneintegratios.uth?ConglomeratesinChinaarenotanw.yegrownsnceheeraoftheplannedecomy,partlycauseofoportunismandpartlybecausetheyhadlitlechce.Theneedoowntheentresupplychan,foromeofthematleast,isforgrowth.Aftertheysuccessfullyccumultedasizeableuserbaseinheircorebusinessline,firmsnaturallyexpandintoadjacentidstriesforgrwth.Butitismainlyaeot,kedlopedlegalsytemandkf.nayeerketisunderpenetratedandtheexistinginfrastructureisinomlete,itmakessenetobrigasmanyprocessesaspossibleinsidethefirm.Givenunderdevelopedcnsumerprotectionmchanism,consumersinthispartfedeoedrmshzddms–,mot,np.emomtnetwrsoereFiTechidustry-itiallyfreefromregulatoryoversight,thereturnoncapitalwashihvstraditonalbaningmanlyforleding,ivenmuchlessriskcapitalrequirement.ThisattractedinvestorssearchingfrdnaweteomNewentrantstochallengetheestablishedecosystem:WeareseeingothercopaniescurrentlyoutideofheFinechecosystemeiterdiretlyoridirectystartenteringtheFinTechspaceastheystrivetocosetheoopithneirownsppychains,espciallyinemt.mtsondyeneurstheinitialouhpointwithcnsmersandacruclgatewaytomtr.msemgroup-uyingplatformMeitunDianpng,orolinedisountretailerVipshp(VPS).Historically,thesecompanishavereliedonAipay/WeChatPaytopocesstheirpyments,teeydemtsnr.tsoyoythesenewentrantswillbeuccessfulnhllengngheexistingorder,butwehilightthatnew,lare,privateentrantscannoteruledoutofthecurrentlndscapeoreosystem.The‘integration’mindsetwillcontinuetodefinehowChineseentrepeneursthinkaboutheirstaegies.eeeetede’setwillcontuetoshapehowChineseusinessleadersthinkaboutheiroverallstrategies,rwyeeaednfcss–alwaysincontextofthewholeecsystem,andrelybyindivdulines.hsprobablyexplainshycmpaniesinvestheavilyinthepaymentbusnesses,althouhtheprofitprfilesratherunattractive.mpswmssece–alyoeerreem,dotdstousersanddirectthmtomoreprofitabebusinesseswithintheecystem,andofitabilitymessecondary.ThissayermtteltnrsfeendDidyoukn?Inthesecompanies’2016annualreports95times:Alibabamentinedthewod‘Ecosystem’35times:PingAnmentioedthewodIntegratedfinance/financial’,‘Ecosyste’,or‘One-sop’13times:TencentmentionedthewodEcosysem’,or‘”onnecion”saegy’,or‘onnecion/conneced’*13times:JDmentionedtewod‘One-stop’or‘Coprehensive’*10times:Baidumentiondthewod‘Ecosystem’22times:ICBCmentionedthewod‘Internet’or‘FinTech’*Note*:Strategyproduct-reatedcontextnl,excludngaccountnglegal/technicalrmsAlthouhheFinTechsectrhadseensinificantgrowhinthepastwyears,thecombnedmrketshareoftodayisstillafractionofChina’scolossalfinanialsystem,andheregulatorsarestillgyh–teefinalformoftheFinTechecomlyeyditmetmee.eelikelythegoernment,thrughmanyfomsinluingregulatorybodies,willcotiuetolayabgrolentheuture.Itiscrucialorstowatchheregulatorydirectionfromre.t:Totalpaymetvalue(TPV)ofthird-partypaymentfirmsis13%oftatofbankcardtransactions.ytPVs%fkdn

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3 14 215 216*oalsoilfinncingldingonsndeuitis:,,nhslIth :,,nhslItygs:Regulationplaysavitalroleindeterminngthefutureevolution.Overtheyears,theFinTechegulaoyenvionenthasshifedfomheiniialfeehandopomotegrowth,toamorebalancedapproach.TheseregulatorytrendswillbedetailedineachofouriseofhinaFinTechepots.Weexpectitoconinueoevolve,especiallyihpivaecapial’suncharaceisicallyhighpaicipaionininfasucurebuild-u,andhenascentnaueoftheindusy.Theegulaoryenvionmenthassuppedinnovaion,yn0.ehistoricalproectionandstrctregulatio,tradiionalincialinsttutons(especialybanks)emyvdds,demogyhacontiuigstucturalmimatchbetweenupplyaddmand.Thisgneratesarelativelyuncopetitiveenvironment,withonsersandsmallbusinesses’nancialneedslargely.rycostsandlackofinastructure(suchaspersoalcreditscoringsystms)alsohinderedbanksfromentge.ssmythe‘newormal’,alargelyinvestment-and-SOEledeonomyisoongersustaible,andconsumerspndigandSEgrowtharebecomgrepivotaldrivers.Withthatmacrobackdrop,hegovernmentandregulatorsaveexplicitlyexpressedsupportforfinncialndtee,dmdrsysbanksunilrcently.t:Theregulatoryenvironmethasingneralsuportednnovation,btstatdtogetmoresopiticatedinriskmanagement.uotesonntrnetfnancefrmtheReortontheWorkoftheGovermetbyPremerLiKeqngecorageheealtyeeoetofe-omc,nsaleors,ndetakg,dtoueetsdcmaesonesetirreceneanlmk.nlreateerynoongicusiefiace."

20152016

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2017:elfe,nslthThetighteningtrendoftheregulatoryenvronmentwillincreaseregulatorycosts,althouhoveralltheregulaoryenvironentisstlluportive.Iitialyfreefromregulatoryoversights,teFinTechiustryboomedandwihtherapidgrowthcamefraudanddangerousfundingodels,especiallyintheinternetlndingspace.Asriskseventsstartedtooccur,Cheseregulatorsstartedtoputmoreemphsisonmar