Reforming the Financial Industry: China’s Top 10 Fintech Companies
►The fintech sector is led by companies that are incubated by corporate giants, including Alibaba, JD.com and PingAn.
►Online banks and credit services support platforms are consistently using technologies to empower the credit loan market.
►Other sectors have given birth to many top emerging fintech companies, and the sub-industries, including payments, securities, and insurtech.
Fintech is defined as technology-enabled innovation in financial services that could result in new business models, applications, processes, or products with an associated material effect on the provision of financial services, according to the Financial Stability Board (FSB).
In China, fintech companies serve as a support layer in the financial service industry by utilizing new technologies, such as AI, blockchain, cloud computing, big data (ABCD), and Internet of Things (IoT). Although compared to western developed countries, China’s fintech industry is still in its early stages, it shows large potential with more room to explore. According to Oliver Wyman, Chinese financial institutions have invested CNY 152 billion in technology, and the figure will grow at a CAGR of 21.4%, reaching CNY 401 billion in 2023. The investments in the global fintech industry were steadily growing from 2015 to 2018, with a slight decrease in 2019, which was caused by Ant Technology’s huge financing round in 2018. And the funding for China’s fintech industry has been rising since 2015.
In the last decade, some global fintech unicorns have emerged. Here we have picked ten representative companies that have outperformed others within their sectors in China and beyond.
Comprehensive fintech: Leading the entire industry
The integrated fintech companies provide well-rounded financial services and technical supports to financial institutions. They have the largest market capitalization and the widest client base among all the players in the Fintech field. Two out of the four companies in this sector, Ant Technology and Lufax, ranked top 10 in the Hurun Global Unicorn List 2019. The companies are actively deploying the to-B market.
Ant Technology & JD Digits: Two top E-commerce- backed fintech giants
Ant Technology (check out our latest article), previously known as Ant Financial, is incubated by Alibaba, crafted with the intention of providing inclusive digital financial services to the public. Focused on individual clients, Ant started its business in the payment market, with its independently developed product; Alipay’s users reached 1.2 billion worldwide. Currently, the company is actively deploying its to-B business with comprehensive technology solutions, with specialties in blockchain, cloud computing and IoT.
Now Ant is valued at over CNY 1,000 billion at the top of the global unicorn list. In the future, Ant expects to unite the entire financial industry with banks, securities companies, and insurance companies, to form a better financial environment and provide a well-rounded digital life platform for the public.
Bravely stepping out of the finance field, just like Ant Technology, JD Digits is considered to be the largest competitor for Ant. Empowered by the technology advancements, two companies are now competing intensively in both financial services and other fields.
Centered on JD.com, JD Digits provides digital risk management, client management, products and B2B2C corporate solutions based on AI, IoT, blockchain. Currently, the company has business layouts in multiple scenarios, like smart cities, digital farming, digital marketing and intelligent robots. The clients of the company include individuals, businesses, and governments.
The weight on the shareholding from JD.com in June pushed the market capitalization of JD Digits to nearly CNY 200 billion. In its projection, it will go beyond digital finance, to construct industrial digitalization, which the company believes is the only way to deeply connect the real economy with the finance industry, therefore creating more value.
Lufax & One Connect: Two fintech wings for PingAn Group
Lufax is the star incubation project for PingAn, worth over CNY 270 billion. Backed by the largest financial conglomerate in China, Lufax provides both individuals and institutions with digital financial services and high technology.
The wealth management service, which is the main business sector for Lufax, recorded a year-over-year surge on asset under management (AUM) on institutional clients of 780.3% in 2019 from CNY 7.41 billion to CNY 65.23 billion. The other main business for Lufax is the credit loan, which faces both individual and small businesses.
Last year, Lufax closed its P2P business, worth over CNY 400 billion, marking its commitment to transform into a technology-based financial platform.
One Connect (OCFT:NYSE), which launched publicity in the US at the end of 2019, defines itself as ‘Technology-as-a-Service’ platform. Unlike Lufax, which uses technology to empower itself, one Connect serves as the technology output platform of PingAn Group. The company has 12 tech-based solutions for both large financial institutions and small businesses, including banks, insurance and asset management, on marketing, risk management, product, technology and operations.
One Connect has also deployed in the overseas market, especially in Thailand; 3 out of the top 10 banks are using the risk management solutions by the company. It also cooperates with Hong Kong and Japan in blockchain-related services.
Online banks and credit service platforms: Emphasis on loan services
The central bank published its development plan for the fintech industry in 2019, with one of the emphases on credit finance, which required the companies to increase innovation in technologies to empower the financial services industry and support small businesses and the public. With encouragement from the government and the increasing financing demands in society, companies operating in loan services, such as credit platforms and new banks, are ushering in a new ‘spring.’
Webank: A representative E-bank
Established in 2014 by Tencent, Webank is the first private-owned online bank in China. With neither branches nor counters, Webank deploys its lending business based on AI-based face perception and big-data-based credit grading. Both small businesses and individuals can easily request loans from the Webank App. Also, Webank unites traditional banks in its co-lending business. Backed by the large traffic of the Tencent ecosystem, Webank has built its cooperative online networks centered on QQ and WeChat to promote its credit programs. Based on different scenarios, the company offers lending services on auto, houses, and personal consumptions.
Targets on lower-tier banks and small financial institutions, Webank provides technology solutions, serves as an agency platform to offer financial products online for their customers.
As an innovative online bank, Webank has expanded nearly 36 times and has quickly benefited from its significant cost advantages and technology advancements, valued at CNY 150 billion, ranked No. 11 in the global unicorn list.
Bairong & Linklogis: devoted to solving financing problems for small business
Bairong is a fintech application platform, focusing on the risk management for banks and tech-based solutions for connecting financial institutions and small businesses. The company is building an ecosystem based on technology, such as AI, big data, machine learning and blockchain, to help financial institutions in transformation. The supports are intended to bridge the gap between lenders and the borrowers, which are small businesses, by utilizing intelligent measures to control credit risks and increase efficiency in the credit assessment process.
Linklogis, a supply-chain finance platform, focuses on digital credit services. Similar to Bairong, Linklogis serves as a linkage between the two sides in small business financing, by digitalizing the entire process. Equipped with advanced ABCD developing abilities, the supply-chain platform provides financial institutions with a precise and well-rounded financial map and credit conditions of small businesses, which significantly reduces the lending risks.
What is more, the company also offers tech-based solutions on digital cross-border trades in anti-fraud and risk control, and several blockchain platforms centered in different financial services.
Other sectors are also growing at a robust speed
ZhongAn: insurtech original
Founded in 2013, ZhongAn (check out our latest article) started its business in online insurance, targeting individual clients, becoming the first massive insurtech company in China, and went public on Hong Kong Stock Exchange in 2019 under the ticker 06060:HKEX.
The company has its business layouts in multiple scenarios, such as healthcare, consumer finance, everyday consumption, auto consumption and travel, with comprehensive insurance products provided. After years of exploration, ZhongAn finally recorded a profit in its insurance business sector, proving the feasibility of online insurance.
Its main subsidiary, ZhongAn Technology, was established as a technology output window, providing well-rounded solutions that cover the entire chain in insurance services, through product design, marketing, underwriting, claiming and following services. Also, outside of insurance, the company opens its ‘Annchain' platform, based on a combination of blockchain, AI, and cryptography, to offer an ‘open but unshared’ operating environment in digital assets and smart contracts for financial institutions.
China UnionPay Merchant Services (UMS): An old but new fintech player
China UMS is the oldest company in our list, founded in 2002 by China UnionPay. The payment market, where China UMS operates, requires a high instinctiveness in new technology applications, and is pushing the company to transform from a payment provider to a fintech company. The company has developed multiple innovative payment methods through face perception, voice print and vein scanning.
Outside the payment field, China UMS provides one-stop intelligent business operation solutions, including big data applications, O2O marketing, smart logistics, intelligent retail, and cloud service.
Futu Securities: Tencent-backed online securities platform
Futu (FUTU:NASDAQ), another Tencent-backed fintech company, provides brokerage services with margin trading in the US, Hong Kong and mainland securities market, IPO underwriting and other to-business services. Fees and commissions are the main revenue source of the company, consisting of over 50% of total income since the very beginning, margin financing and securities lending services and to-B elements are considered to be the future drivers of the company.
With increasing disposable income, more Chinese Investors are moving their attention to the overseas market, which provides more developing room for Futu (check out our latest article).