Chinese financial technology companies could expand the lendable population from around 200 million creditcard-carrying prime borrowers to around 800 million, according to the latest report of global consulting firm Oliver Wyman.
The report said big-data analysis, the internet of things, and blockchain are the three technologies with the greatest potential, owing to their ground-breaking capabilities to acquire, assemble, analyze, and apply information. Data treatment and information processing are at the heart of decision-making for financial services, especially in China.
Blockchain uses a cryptographic network to provide a single source of truth, enabling untrusting parties with common interests to co-create a permanent, unchangeable and transparent record of exchange and processing without relying on a central authority.
The report said the application of these technologies will create significant disruptions along value chains and bring about distinctive opportunities for major areas of the financial services sector.
In financing, with the availability of non-financial data sources and improved knowledge of how to use it, fintech players will be able to use behavioral data-based models to better judge which customers intend to repay their loans, and so identify fraud risk.
“For digital lenders, such advances open up a blue ocean with a long tail of around 600 million Chinese borrowers who were traditionally considered below-prime and too risky to lend to,” said Cliff Sheng, Oliver Wyman partner and author of the report.
In investing, with stronger computing capabilities, online wealth management platforms can conduct detailed analysis by pulling together various types of data about the market, individual securities, and investors, the report said.
“Assuming these solutions with fintech applications attract 2.5 percent of invested assets by Chinese self-directed investors by 2020, these would represent assets under management worth 5 trillion yuan ($743.62 billion),” Sheng said.
In the area of insurance, connected ecosystems, along with the increased adoption of technology devices, provide not only gateways to innovative insurance products but also alternative data sources for tailored products and pricing, it said.
“Such technology upgrades and ecosystem embedding could present insurers with premium revenues amounting to 400 billion yuan by 2020,” the report said.
According to the report, China’s fintech sector has attracted $6.4 billion in investments in 2016, making it the global leader in fintech venture capital activities representing 47 percent of global fintech investments, up from only 7 percent in 2013.
With this major potential for a new wave of technology-driven growth, there is no one-size-fits-all approach that will suit all market players.
The report summarized key success factors: data abundance and application, a large customer base, availability of proprietary and comprehensive products, and strong knowledge of financial services and risk management.
Source: China Daily