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China’s fintech investment down in 2019

Fintech investments in China totaled about $4.5bn last year, about one-fifth of the amount in 2018, according to a report by KPMG.

Fintech firms in China attracted a total of $4.479bn in investments from venture capital, private equity and through M&A during 2019, according to the KPMG report, which was issued this week.

The global figure for fintech investment last year was $135.7bn and for Asia-Pacific it was $12.9bn, the report said.

China’s total was way down after a surge of investment in 2018 ($26.05bn), but the country’s fintech market continued to see substantial activity and Chinese firms were still involved with the largest fintech deals in Asia-Pacific last year, the report noted.

“China’s large technology giants continued to focus on growing their reach geographically, making investments or plays well outside of Greater China.

Ant Financial, for example, submitted an application for a digital banking license in Singapore in late 2019, while Tencent made a number of significant investments in fintech companies in other regions throughout the year, including Ualá in Argentina,” the report said.

Moreover, investors in China also began to turn their attention to up-and-coming areas of fintech including regtech, which has appeal among venture capital investors because of its ability to leverage artificial intelligence and machine learning to assess risk and identify fraud.

China-based investors are also interested in fintech firms that use these technologies more broadly to improve the operations of banks and financial institutions, such as improving operational efficiencies, generate and analyse data, as well as support wealth management, the report noted.

Government support

The report also mentioned the support from the government, saying that “the third quarter of 2019 saw the People’s Bank of China unveil a three-year plan to support the development of the fintech industry. Since then, there has already been a number of moves focused on implementation”.

“We anticipate an increased regulation and guidance for the industry and an enhanced infrastructure to support fintech development,” said Chris Wang, partner, head of fintech for KPMG China, in the report.

“For example, the sandbox mechanism [in China] is being designed and may soon roll out to test the concept of different fintech [firms] to make sure they comply with regulations and will achieve the desired results before they enter the market,” Wang added.

Fintech in Hong Kong

The fintech market in Hong Kong got a boost in the fourth quarter of 2019, driven by Alibaba’s decision to do a secondary listing on the Hong Kong Stock Exchange, which raised $11.2bn, making it the world’s largest listing of the year, the report noted.

Earlier in 2019, Hong Kong issued the first batch of eight digital banking licenses. Zhong An was the first to launch a digital bank pilot, with others expected to follow suit in 2020.

The report said Hong Kong could see an upswing in investments in related areas, like KYC, regtech, digital onboarding and communications, and digital banking infrastructure. The issuance of digital banking licences has also pushed traditional banks to improve their own digital offerings, according to the report.

China’s fintech investment

Part of the Mark Allen Group.