China is considered a global frontrunner in fintech, short for new financial technology and innovation. In China, mobile payments already prevail in supermarkets and brick-and-mortar stores. Moreover, the world’s major mobile payment services, Alipay by Alibaba and WeChat Pay by Tencent, are both Chinese. Finance Finland’s (FFI) recent English-language report takes a closer look at China’s financial system and payment services.
Approximately 80% of the Chinese have a bank account. Of them, one fifth use their smartphone to pay for their purchases. In comparison, none of the respondents in FFI’s Finnish payments survey picked a mobile application as their most common method of payment.
The Chinese mobile payment market is dominated by the two giants, Alipay and WeChat Pay. Alipay has been estimated one of the world’s most valuable fintech companies. However, fast technological developments have also caused problems in the world’s most densely populated country: cybersecurity has failed to keep up with the developments.
Soumiti Ghosh has studied the banking and payment systems of both China and India.
“For instance, the infrastructure in metropolises has quickly grown to rely on artificial intelligence. A cyberattack into such smart systems could completely paralyse society for a long time,” warns Soumiti Ghosh, who wrote the survey during an internship at FFI.
In recent decades, the Chinese economy has experienced staggering growth. According to the World Bank’s statistics, China has doubled its GDP every eight years since its markets opened up in the late 1970s. Thanks to this boom, some 800 million people have risen from poverty, making the Chinese economy the second largest in the world.
Some of this growth owes to the Chinese financial system. China’s banking and payment systems did not begin to develop in earnest until the 1970s, when the first commercial banks were established. Until then, China had only had one bank, the state-run People’s Bank of China.
“One reason behind China’s success in fintech could lie in its young commercial banking sector. Without having to overcome long-established, deeply-rooted banking traditions, China could quickly adopt fintech,” analyses Ghosh.
Ghosh took part in the Hanken School of Economics internship programme for educated immigrants. Her main project at FFI was to compile a report on the payment systems and the digitalisation of financial services in India.
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