Fintech Talk: August 5, 2016
Twenty-seven fintech unicorns were the focus this week when Business Insider UK released a ranking of these companies by their value. Heading up the list was Ant Financial, which runs Alipay, the biggest mobile payment network in China. Alipay boasts 450 million users and 170 daily transactions, with a whopping $4.5 billion (£3.4 billion) in funds raised. There was a strong China presence in the list, with the top four rankings held by Chinese fintechs (Lufax, JD Finance and Qufenqi). Among the fintech services on the list of twenty-seven included peer to peer lending, online credit reports, digital health insurance, HR/payroll management and more mobile payment platforms.
China’s peer-to-peer lending industry is indeed growing rapidly, but the industry in facing a notable challenge in the region, according to the Financial Times. There is evidently a perception in the Chinese fixed-income universe that default is impossible. Outstanding loans from Chinese P2P lenders went from RMB104bn in 2014 to RMB621bn at the end of June. In response to the industry moving too quickly, the government suspended corporate registrations for all companies with the term “finance” in the name. Soul Htite, the co-founder of Dianrong.com, commented on the trend, saying that in an investing culture where defaults are rare, Chinese investors tend to choose products purely based on yield. The approach to taking on this issue has resulted in many platforms forcing diversification for lenders.
In the theme of unconventional financial services, Business Insider UK also published UBS data from a report on how likely consumers in different countries are to use financial services from non-bank providers. The results show that Italy and the U.S. have the highest rate of users willing to do so, indicating that these two nations are most at risk of fintech disruption. Awareness of fintech, culture, poor banking services and lack of banking services are pointed to as potential reasons for the shared attitudes. Some of the key takeaways from the report are that banks need to act quickly to preserve relationships with consumers; banks branches and ATMs will be non-essential; and smartphones will have a growing role in banking. If one thing is for certain, it’s that banking in Millennials’ future will certainly look different.
Automated portfolio planning, automatic asset allocation, online risk assessments and account re-balancing are just some of the digital tools now available through robo advisors. Robo advisors are a familiar phenomenon to fintech spectators, making their mark by allowing more people to invest by providing economical, automated and digital planning tools. It may sound like robo advisors are tailored towards Millennials, but a recent E*Trade Streetwise study showed that the age groups of 25-34, 35-55 and 55+ all would rather have some level of robo/digital tools integrated into personal finance.