The US has already lost this Trade War (Chinese Fintech)

The US has already lost this Trade War (Chinese Fintech)

Brett King 13/10/2018 7

I visited Shanghai again this week at the request of Huawei’s Enterprise Business Group as a part of their annual Huawei Connect event. This year’s theme was Active Intelligence and at the conference hall held at the Shanghai World Expo and Convention Center we saw demonstrated “smart” technologies ranging from smart city applications, smart education, smart transportation, smart everything…

One of the most impressive technology demonstrations was an AI that was able to translate Chinese to English and vis versa, faster and more accurately than the best human translators. This is just the start. Huawei is build an AI ecosystem of partners that is targeted to exceed 1 million developers alone over the next 3 years.

In my latest book Bank 4.0: Banking Everywhere never at a Bank, I discussed the magnitude of China’s fintech revolution and how it’s leaving the US banks in the dust. This year Ant Financial and Tencent will preside over more than $22 Trillion in mobile payments – representing 98% of the lucrative Chinese mobile payments market. To put that in perspective, that’s more than the entire world’s debit card and credit payments volume this year – Visa managed just $2 Trillion in Q2 of 2018. China’s mobile payments market is more than 4x the size of Visa’s global transaction market as of today.

There are 4,000 P2P lenders in China, and while a recent regulatory crack down resulted in numerous defaults and a sizable shrinking of the sector, P2P lending already accounted for US$192 Billion in lending in 2017 (see Bloomberg). While still only 2% of the retail lending market, it represents around 25% of the unsecured personal lending market in China. A serious foothold.

But the serious action is happening in transactional banking. This is where the US should take particular note because it signals that the threat from the likes of Amazon and larger Fintech's is still seriously under estimated.

The world’s most successful deposit product sits in Alibaba’s sister company, Ant Financial's wheelhouse. Yu’e Bao has generated more than $300Bn in consumer-level deposits in just a few small years. The nearest competitor to this in the US is JP Morgan’s US Treasury Bond Fund which is less than half the size. This all without a single human financial advisor, paper-based application form or branch distribution channel whatsoever.

The largest challenger bank in China was founded by Tencent, called WeBank. Today, WeBank has more retail customers than JP Morgan Chase has in the United States. WeBank, based in Shenzhen, has a real-time blockchain core, can monitor marketing campaigns, transactions, applications, cyber security threats and everything else operationally in real-time with an impressive control centre in the heart of SZ. With more than 80 million retail customers, this 3 year old bank is a phenomenal player in the Chinese ecosystem today, with no sign of slowing in its J-curve growth path.

Just think about that. The biggest deposit product in the world is completely digital and 2x the size of the nearest major in the US. The largest fintech bank in China has more customers than JP Morgan Chase. The mobile payments business in China is larger than the world's entire plastic card market. Yup...

This success in deposit taking and lending for fintechs and “BATX” Big tech in China, has shocked the incumbents into action. Today 4 of the top 5 retail banks have deployed blockchain core systems for core retail activity. All of them now offer their suite of retail products via mobile; an innovation forced on them by the likes of Ant and Tencent. AI investment in the top 10 Chinese banks dwarves that of the entire US banking sector. The risk of fintech and tech disrupting China is very real with more than 40% of deposits now moving outside of the mainstream banking sector. None of the top 50 banks in the US has a blockchain core, and only a fraction of them can onboard customers on a mobile phone.

With the regulatory mire in the US we see barely any support for Fintech investment writ large and current regulatory posture is aggressive positioned against digital only banks, along with the current administration's lack of clear policy in respect to Artificial Intelligence, the push back against H1-B visas and the broad lack of STEM investment in education - this is one Chinese Dragon the US has no hope of catching.

The US could conceivably catch up, but they are likely already 7-10 years behind. It would take a miracle...

Share this article

Leave your comments

Post comment as a guest

terms and condition.
  • Rick Tennyson

    The SCARY thing is that MOST OF THE LIQUIDITY in Chinese firms isn’t coming from INTERNATIONAL INVESTORS. America is certainly losing this trade war.........

  • Callum May

    Excellent article

  • Michael Johnson

    I expect more money to come pouring out of China.

  • Rob Williams

    Despite their size, though, many of these titans aren't well-known outside of their home country.

  • Aurelien Bloquel

    Well said ! Thoughtful piece !

  • Greg

    What is a "blockchain core"? No top 50 or even top 100 bank in the world has a core platform running on blockchain. That's insane.

  • Greg

    "and only a fraction of them can onboard customers on a mobile phone"

    This also is not true. Fraction implies a small percentage, which is not at all true.

Share this article

Brett King

FinTech Expert

Brett King is a futurist, best selling author, award winning speaker and host of a globally recognized radio show. He is also co-founder and CEO of Moven, a New York-based $200m mobile banking startup with over a million users. He is widely regarded as one of the top 5 global influencers in financial services, and his book Augmented was cited by China's President Xi Jinping as recommended reading on artificial intelligence. He advised the Obama administration on the Future of Banking, and has spoken on the future in 50 countries in the last 3 years. Brett focuses on how technology is disrupting business, changing behaviour and influencing society. He has fronted TED conferences, given opening keynotes for Wired, Singularity University’s Exponential Finance, The Economist, SIBOS and many more. He appears as a commentator on CNBC and has appeared regularly on the likes of BBC, ABC, FOX, Bloomberg and more. His radio show, Breaking Banks, began in May 2013. It was the first global show and podcast on FinTech, and has grown to be the most popular with an audience in 140 countries/ 3.6 million listeners.


Latest Articles

View all
  • Science
  • Technology
  • Companies
  • Environment
  • Global Economy
  • Finance
  • Politics
  • Society