The People’s Bank of China (PBOC), the country’s central bank, has released a three-year fintech development plan that aims to improve the quality of financial services, strengthen regulation on technology-driven innovations, and prevent financial risks.

China wants to make its fintech sector a world leader and use the industry as a “new engine” for the development of its high-quality financial sector, the PBOC said in a statement.

Under the plan, China will establish a framework for fintech development by 2021 that focuses on enhancing fintech application in the financial sector, enabling in-depth integration and coordinated development of finance and technology, and boosting consumer adoption of digital, Internet-based financial products and services.

The plan lays out six main tasks and priorities:

• The need to strengthen the strategic deployment of fintech, improve forward-looking design, identify fintech development trends, and concentrate on coordinated planning, optimization of systematic arrangement and talent building;
• Identifying proper fintech applications, key breakthroughs to drive development, and adequate regulation and control of key generic technologies;
• Enhancing the quality and efficiency of financial services by diversifying financial service channels, enabling cost reduction, and optimizing financing services to benefit Chinese consumers and allow for the healthy and sustainable development of the real economy;
• Enhancing technological capabilities to prevent financial risks, properly balance the relationship between security and development, leverage fintech to identify, curb and tackle cross-market, cross-industry and cross-regional financial risks, and strengthen control of cyber-security risks and the protection of financial information;
• Strengthening fintech regulation by developing a system of fundamental regulatory rules, exploring innovative management mechanisms for fintech, facilitating integrated statistics for the financial sector and making financial regulation “more professional, unified and penetrating”; and
• Consolidating basic support for fintech while improving the ecosystem, optimizing relevant governance systems, and taking appropriate steps in the fields of technology, laws and regulations, credit services, standards, and consumer protection.

Over the past years, China has emerged a key contender in the global fintech race. The proliferation of software technology and mobile phones, as well as lenient regulations when it comes to data privacy, have allowed domestic Internet giants to experiment with and deploy new ways to transact and manage money, reaching the millions of people and small businesses that had historically been excluded from the traditional banking sector.

Leveraging technologies such artificial intelligence (AI), machine learning (ML) and big data, China’s Internet giants Tencent and Alibaba have been able to make lending decisions and offer loans to the country’s rural populations and small businesses through a process that takes just a few minutes.

Today, China is home to some of the world’s largest fintech companies and the world’s largest fintech market. According to Accenture, fintech deals in China amounted to US$25.5 billion in 2018, or 46% of all fintech investments globally.

Allibaba’s financial affiliate Ant Financial is now worth US$150 billion, making it the world’s most valuable unicorn startup company in the world. Internet giant Tencent counts more than one billion monthly active users on its multi-purpose app WeChat, which, alongside messaging and social media features, also offers mobile payments.

Both companies are responsible for more than 90% of smartphone-based payments in China, and handled US$25 trillion worth of transactions in 2018.