When talking about fintech in China, it is common to hear mentions of hubs such as Hong Kong, Beijing, Shanghai and Shenzhen, but the lesser known city of Hangzhou is quickly catching up with its counterparts.

Hangzhou, a startup hub

Hangzhou is the fourth largest city by Internet company numbers, and according to the New York Times, it hosts more than 1,000 startups.

The city’s most notable tech firm is China’s largest e-commerce firm Alibaba. The e-commerce giant got its start in Hangzhou and has maintained its headquarters there, as did Chinese conglomerates like Geely, the parent company of Volvo, and Wahaha, the largest beverage company in China.

Other notable startups include Goji, the “Uber of English language learning,” which uses a social media model to match Chinese students to native English speakers living in China, and Entertech, the creator of Naptime, an eyeshade that uses EEG technology to help users sleep better.

“Startups in Hangzhou can get a lot of help, whether from the government, capital markets or society,” said Tong Luyao, chief operating officer at Hangzhou-based Entertech. “We got our angel investment through an entrepreneurial roadshow organized by Zhejiang University. The government provided offices free of charge to help us get through the most difficult stage.” He added that the city boasts a high degree of internationalization, a constant inflow of talent and a lower cost of living than nearby Shanghai.

Most of the city’s startups, about 710 according to the New York Times, are located in Dream Town, a tech district near Alibaba’s headquarters on the outskirts of the city. The startup hub offers successful applicants free office space, cash subsidies and training. It hopes to eventually attract 10,000 university graduates to set up startups.

Jack Ma, Alibaba’s co-founder and executive chairman, has said in interviews that Beijing is the hub for state-owned enterprises, Shanghai attracts multinationals and Hangzhou is something else entirely: “In our city, we like entrepreneurs. We like people from nothing building an app.”

Fintech in Hangzhou

In the past years, Hangzhou has seen its fintech industry grow rapidly. Leading fintech conference Money 20/20 has even chosen Hangzhou to host its next event set to take place from November 14 to 16, 2018. This will be the first time the conference will be held in China.

Ascential plc, the company behind the conference, said it chose Hangzhou because the city was one of the key fintech centers in China while the country is leading the world in terms of digital finance and financial technology.

In 2017, four startups from Hangzhou made the list of KPMG’s top 50 Chinese fintech startups. These are Ant Financial, Alibaba’s payment affiliate, Tongdun Technology, Wacai, and 51 Credit Card.

Ant Financial, the operator of online payments service Alipay and the financial affiliate of Alibaba, has become a financial giant that is said to be valued at US$60 billion. Since its launch in 2014, the company has evolved from the Alipay payments business into money market funds and micro-loans and is said to be considering an initial public offering.

Tongdun Technology is a risk management service provider that covers a wide range of sectors including banking, microfinance, insurance, fund management, third-part payment, e-commerce and social media, among others. According to Crunchbase, Tongdun Technology has raised over US$150 million in funding. The last round, a US$78 million Series C, was raised in October 2017.

Wacai is a startup specializing in bookkeeping services, in particular for clients who tend to be omitted from mainstream financial services. Its bookkeeping and financial management apps are highly popular among individual Chinese users. In 2016, the company established an online asset management postdoctoral center in a bid to position itself as an industry think tank. Wacai has raised US$228.5 million in funding so far, according to Crunchbase.

51 Credit Card is a liability management, financial and technology services provider. The firm also has an investment fund that focuses on upstream and downstream enterprises. 51 Credit Card has raised US$459 million in funding so far, according to Crunchbase.

A rising blockchain hub in Hangzhou

One area in particular that has witnessed significant traction and growth in Hangzhou is blockchain technology.

The Hangzhou government announced last year that the city was building China’s first blockchain industrial park with preferential policy support for the companies operating in the space. Called Blockchain Valley, the center is located at Alibaba’s Hangzhou headquarters.

With this in mind, China’s Cheung Kong Graduate School of Business (CKGSB) is launching a new MBA elective in fintech this year, becoming the latest school to jump on the blockchain bandwagon. The new MBA will combine behind-the-scenes company visits with classroom teaching to immerse students in China’s booming blockchain scene.

“Even the traditional financial industry is doing business in blockchain,” said Ou-Yang Hui, chair professor of finance and associate deam of the CKGSB MBA. “If our students want to get a job at a leading corporation, they need to know about blockchain.”

According to a recent report by Lieyunwang.com, blockchain talents are in high demand in China. Chinese Internet giants including Tencent, Lenovo, JD.com, Qihoo 360 and Meitu are all involved in the race to recruit China’s top blockchain talents. Beijing, Shanghai and Hangzhou are where demand is strongest, the report says.

In April 2017, the government hosted the Global Blockchain Financial Summit attracting 2,000 blockchain enthusiasts and experts from the around the world.

As of May 2017, Hangzhou boasted 12 blockchain startups, a number only surpassed by Beijing and Shanghai, according to Bitcoin Magazine.

Featured image: Panoramic night view of Hangzhou, China, by zhu difeng, via https://www.shutterstock.com/image-photo/panoramic-night-view-hangzhou-china-235669699.