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Just as 'non-traditional' financial service says, it showed up in recent years and is still experiencing higher growth than the entire market.
Isaac Smith
This article is Chapter 4 of EqualOcean's comprehensive analysis of Lufax Holding. Explore all the chapters of the report:
Chapter 2: COVID-19: Unexpected stimulus
Chapter 3: The race between China's fintech trio: Lufax, Ant Group, JD Digits
Chapter 4: Huge growth potential in markets
Chapter 5: Operation strategy: Capital-light model and unique client segment
Chapter 7: Diverse client acquisition channels
Just as 'non-traditional' financial service says, it showed up in recent years and is still experiencing higher growth than the entire market.
According to the Oliver Wyman Report, the total outstanding retail credit loan balance of the leading non-traditional financial service providers reached CNY 3.6 trillion in 2019 with a CAGR of 90.4% since 2015, and it is expected to grow to RMB10.0 trillion in 2024 at a CAGR of 22.7%. During the same five-year period the overall retail credit market grew by a CAGR of 15.9%.
The expanding trends will drive all the companies in non-traditional retail markets in China, which are mostly online platforms. From 2015 to 2019, the large online credit loan providers are taking up increasing shares from 33% to 92% in the market. In the future, the competition will happen within these eight giants, including Lufax. As illustrated, Lufax has certain advantages among other players, and therefore, a rapidly growing but more concentrated market is an encouraging sign for the company.
Personal assets in China were usually managed by people themselves in the past. However, with people getting wealthier, FIs are playing more important roles in asset management with more personalized investment services.
The total AUM in the wealth management market achieved CNY 49.4 trillion and will grow to CNY 118 trillion in 2024 with a five-year CAGR of 19%, based on Oliver Wyman's expectation. The AUM figure for the non-traditional market reached CNY 7.6 billion in 2019 and is projected to expand faster than the entire industry with a CAGR of 29%, from 2019 to 2024. The services will continue to move online with the penetration rate running up from 29% in 2019 to 42% in 2024, closing to the level of 43% in the US.
The total magnitude of the wealth of affluent and middle-class investors accounts for 49.3% in the total figure. The online investable assets of client segments are expected to experience the most rapid growth in the next five years with CAGR of 40.3% and 27.3%, providing large opportunities for online wealth management platforms, especially for Lufax, which targets such clients.
The richest population in China – which owns over 40% of the wealth – without a doubt is served by the traditional banks. The demands of affluent and middle-class investors, therefore, have to be met by non-traditional FIs.