China is the undisputed global fintech leader with the largest fintech market in the world as measured by total investment, total addressable market, and digital usage, and Beijing, Shanghai and Shenzhen are its top three fintech powerhouses.
Shanghai, a global financial center and transport hub, is the most populous city in the world with a population of more than 25 million. In China, the city is a major commercial hub, and a center of higher education with over 30 universities and colleges including the ShanghaiTech University located in the Zhangjiang Hi-Tech Park in Pudong.
In recent years, Shanghai has experienced significant growth in the fintech industry fueled by public strategies put in place to construct a science and technology innovation center.
Shanghai’s tech scene is expected to further grow in new technology areas such as virtual reality, biometrics, Big Data-based risk management, blockchain and AI. These will be supported by increased government support, improved regulatory environment and implementation of Free Trade Zone policies.
Lujiazui, the new fintech center?
In particular, Shanghai’s Lujiazui Financial City is working on developing into a fintech center. Representatives announced earlier this year that the city will be expanding the functions of Lujiazui Emerging Finance Park and accelerating the construction of Lujiazui Startups Block, which aim to increase the number of incubation spaces available to fintech startups.
The area will further optimize its business environment for the emerging finance industry in an attempt to attract more related companies.
Additionally, it will seek cooperation with top accounting firms, consulting firms and media to release fintech index and fintech innovation rankings to increase its exposure in the Fintech sector.
Lujiazui, which has been developed specifically as the new financial district of Shanghai, has used its financial advantages to support quality emerging finance startups since 2014. The area now has a large number of emerging finance industrial bases, catering to startups in all stages of development.
One of Lujiazui’s notable startups is Ice Kredit, a company that uses machine learning algorithms and Big Data technology to carry out credit rating for micro and small sized enterprises.
Ice Kredit has established business relationships with hundreds of domestic and overseas fintech and financial institutions including Union Pay, Shenma Finance, NetEase Small Loan, Taizhou Bank, and Fullerton Credit, a subsidiary of Singapore-based Temasek Holdings.
The company raised its Series A last year, a US$16 million funding round led by China Creation Ventures.
Shanghai’s fintech startups
Shanghai has had its share of fintech success stories. The city currently hosts some of the country’s leading fintech ventures.
Last year, Shanghai was represented by 30% of KPMG’s 2016 China Leading Fintech 50, a prestigious listing by that recognizes the country’s top 50 fintech leaders.
Unsurprisingly, Alipay, China’s leading third-party mobile and online payment platform, was part of the list. Alipay, a brand owned by Alibaba affiliate Ant Financial, is an e-wallet payment method and one of the biggest players in the world in the digital payments space. In 2013, Alipay overtook PayPal as the world’s largest mobile payment platform.
Ant Financial recently made a strategic investment in VFinance, a Shanghai-based startup providing digital financial infrastructure solutions to enterprises in China. Alongside Ant Financial, VFinance is also backed by IDG Partners and Yunqi Partner.
Dianrong is another leading fintech venture from Shanghai and one of the largest online lending marketplaces for personal and business loans in China. The company was founded in 2013 by Soul Htite, the co-founder and former technical director of Lending Club, and Guo Yuhang, a partner in a private equity firm.
In 2016, loans generated by the platform amounted to US$2.3 billion, double the amount of the previous year. Standard Chartered Bank and US investment firm Tiger Global Management are two of Dianrong’s most prominent backers.
Zhong An, launched in 2013 by Ping An, Tencent and Alibaba, is known for being China’s first complete online insurance company. The firm is looking to raise US$1 billion or more in a Hong Kong initial public offering (IPO) in the second half of the year.
Lufax (Lu.com) is an Internet-based wealth management platform owned by Ping An and the second largest peer-to-peer lending platform in China. Lufax aims to provide one of the most comprehensive wealth management platforms globally. Its services include providing risk management expertise, financial assets trading information and related consulting services to enterprises.
Other notable Shanghai-based fintech ventures include ChinaPnR, which provides a range of services including financial account management, payment and settlement services, RQuest, a risk management firm, Ping ++, a payments company, and Juxinli, a Big Data and credit assessment company.
Featured image: Lujiazui skyline, Shanghai, Wikipedia.