China has become the undeniable center of global fintech innovation and adoption, thanks to developments across multiple hubs such as Shanghai, Hangzhou, Beijing and Shenzhen.
With a large pool of highly skilled work force and the presence of educational powerhouses, Beijing, Shanghai and Shenzhen have emerged as hubs for financial innovation.
These locations are continuously investing to nurture a conducive environment for fintech firms in China. For instance, the Shenzhen province has spent more than US$600 million in 2016 to attract global professionals and academics, according to EY.
Today, they host headquarters of a number of foreign and local multinationals such as Microsoft, IBM Cisco, tech giants Baidu, Alibaba, Tencent and JD.com, as well as some of the world’s top ranked universities for technology and engineering.
Shenzhen, the “Silicon Valley of China”
Home to Huawei, ZTE and Tencent, Shenzhen is located in a special economic zone and is known as the “Silicon Valley of China.” It ranks first in China for the volume of patent fillings and is also the heart of the Internet-of-Things manufacturing world, according to Deloitte.
But that’s not it: in 2016, Shenzhen witnessed the formation of the Financial Blockchain Shenzhen Consortium, making the region on track to become a front-runner in blockchain technology.
The consortium, which counts insurance firm Ping An amongst its members, intends to collaborate on research and group-wide blockchain projects with a focus on capital markets technology, securities exchange, trading platforms, banking and life insurance.
Shenzhen versus Hong Kong
In many ways, Shenzhen has leapfrogged its neighbor Hong Kong in attracting new-economy companies. This is due in part to its large supply of engineers and its supportive local government policies.
According to the Financial Times, an increasing number of tech startups and entrepreneurs from Hong Kong are moving elsewhere. A popular choice is Shenzhen where human capital and physical space are more abundant and affordable.
An example is DJI Innovations, the world’s largest drone company, which was conceived at Hong Kong University of Science and Technology but then moved to Shenzhen.
To keep abreast of the applications and latest developments of fintech in Shenzhen, Hong Kong regulators visited the People’s Government of Shenzhen Municipality earlier this week to strengthen cooperation and form a “fintech pact.” The purpose is to “create a more favorable environment for the development of use of fintech by banks and other financial institutions.”
“Hong Kong and Shenzhen have their respective edges in the development and applications of fintech,” said Norman Chan, the chief executive of the Hong Kong Monetary Authority.
“As an international financial centre, Hong Kong has a significant presence of financial institutions from all over the world, as well as a robust and efficient financial infrastructure, which provide a sound base for fintech developments. As for Shenzhen, outstanding technology companies and talents both at home and abroad have been drawn to the city.
“Through strengthening bilateral co-operation, Hong Kong and Shenzhen can complement each other and bring about mutual benefits.”
Tencent: Shenzhen’s success story
One of Shenzhen’s greatest success stories is undeniably Tencent, which first was known for its instant messenger service and games to later become one of the biggest tech firms in the world.
Tencent’s offerings include the well-known instant messenger Tencent QQ, web portal QQ.com, and most importantly WeChat, one of the world’s largest standalone messaging apps by monthly active users which has since expanded to offer other services including payments.
WeChat Wallet, which the firm introduced in 2013, allows users to connect their credit and debit cards to pay for products online and in-store, as well as send payments to their families and friends. As of March 2016, WeChat Wallet had over 300 million users worldwide.
Tencent is also one of the main shareholders in WeBank, China’s first digital-only bank, and a key investor in Asia’s fintech startup scene, having backed the likes of Chinese insurtech company Zhong An Insurance, Indonesia’s logistics and payments startup Go-Jek, and Hong Kong’s Futunn.com, which provides trading services and platforms.
Another fintech venture that Tencent owns is Tenpay, a third party payment platform that provides secure, convenient and professional online payments services for customers and businesses.
Fintech Shenzhen Startups
While tech giants like Baidu, Alibaba and Tencent have largely fueled the growth of fintech in China, other smaller players have emerged in recent years.
Shenzhen Wei Zhong Shui Yin Information Services uses Big Data to provide credit investigation and risk control services, and Viewtran Group is a provider of supply chain financial services and enterprise solutions.
Featured image credit: Wikipedia.