By Zhang Lijuan
In recent years, increasing numbers of Chinese financial technology (fintech) companies have chosen to go global. ASEAN has proven to be their first-choice destination, as Southeast Asia represents a promising market with a combined population of more than 600 million. However, efforts to enter the Southeast Asian market are only just beginning.
Various Channels for Going Abroad
As they have entered the Southeast Asian market, Chinese fintech companies such as Ant Financial, JD Finance, New Union Online and CreditEase have brought the experience they accumulated in the Chinese market as well as technologies related to big data, cloud computing and artificial intelligence by providing local clients with financial services such as online lending and financial management.
Starting by providing mobile payment services, Ant Financial, an affiliate of China’s e-commerce giant Alibaba Group, first entered the Southeast Asian market in 2015. So far, its businesses have reached nearly 10 countries in Southeast and South Asia, including India, Thailand and the Philippines. Besides serving individuals, it has also exported mobile payment technologies to local enterprises in those regions. For instance, Thailand’s e-wallet app TrueMoney has introduced the Alipay global payment system, greatly facilitating online payments.
“Through surveying the Thai market, we found that cash and credit cards dominate offline payments, and local consumers’ demand for safe, reliable and convenient electronic payment is mounting,” revealed a manager from JD Finance. “In this context, JD Finance established a joint venture with Thailand’s Central Group to provide fintech services and convenient and inclusive financial products for Thai users.”
PIVOT Fintech Pte. Ltd., a joint venture co-launched by PINTEC Group and FWD Group in Singapore, has set a good example for other Chinese fintech firms looking to go abroad. PIVOT mainly offers digital wealth management and smart investment services powered by artificial intelligence throughout Southeast Asia.
New Union Online is a Chinese pioneer in online lending. It focuses on providing P2B online loans for small and medium-sized businesses and individual borrowers and helping enterprises solve financing problems, so as to achieve capital growth.
CreditEase and Lufax have also constantly explored the Southeast Asian market by providing services such as wealth management, with an aim to expand investment channels and achieve global asset allocation. Apart from wealth management, CreditEase also offers services such as smart investment consulting, online lending, crowdfunding and intelligent insurance. Lufax aims to provide internet-based wealth management products such as fixed-income products and bond funds for middle-class clients with overseas bank accounts or assets.
Chinese fintech companies have swarmed to the Southeast Asian market because they are optimistic about the market’s future. How big will Southeast Asia’s fintech market turn out to be?
According to Ouyang Rihui, vice president of the China Institute of Internet Economy at the Central University of Finance and Economics, alongside the regional economic integration between China and ASEAN and the transfer of China’s manufacturing capacity to ASEAN countries, Southeast Asia maintains steady economic growth and sees a constant increase in the demand for financial services. In this context, fintech applications have gained popularity in the region.
“At present, many financial institutions in Southeast Asia face challenges such as high costs in client services and mismatching between clients’ demands and managers’ goals, just as their Chinese counterparts have faced — and sometimes even worse,” noted Zheng Yudong, CEO of Xuanji, an intelligent investment advisory platform under PINTEC Group.
Compared to China, Southeast Asia still has a comparatively low coverage of financial services. Except for Singapore, most countries in the region still suffer from underdeveloped financial services systems. Therefore, there is huge potential in terms of market demands.
“Southeast Asia is adjacent to China, so Chinese fintech firms have greater geographic advantages than their European and American counterparts,” explained Zhou Weiqiang, chairman of New Union Online. “Meanwhile, the fact that they swarm into overseas markets also indicates fierce competition in the Chinese market. With cost increases and tightening regulation, their profitability and living spaces are constantly shrinking in the domestic market. However, the Southeast Asian market is in an era full of potential.”
Key to Overseas Expansion
Industry insiders agree that the biggest problems for Chinese fintech companies in exploring the Southeast Asian market are policy risks and financial security. Peer-to-peer (P2P) loans are legal in China, but are banned in some Southeast Asian countries. Some countries even only allow business-to-business (B2B) lending. Such differences in law systems may result in unpredictable legal risks for Chinese companies expanding into overseas markets.
Moreover, Southeast Asian countries vary in development stage, market situation, infrastructure, level of internet services and legal systems, creating challenges for Chinese enterprises exploring the Southeast Asian market. In addition, Chinese fintech firms face dual competition from both transnational tech giants and indigenous tech companies in Southeast Asia.
“To grab a share in the international market, Chinese fintech companies must have strong technological strength and localized management capacity,” explained Bai Bai, vice president of Finup FinTech Group Co., Ltd. “After all, they need to adapt to the different business environments of various countries if they intend to go global. Moreover, they need management teams with international vision and localized human resources and must operate in a way which caters to local cultures.”
Localization is the key to overseas expansion. Zheng Yudong pointed out that Chinese fintech companies can directly export business models to countries with sound economic and financial foundations, and export fundamental technologies to underdeveloped countries to help them build financial infrastructure and improve economic and financial development environments, so as to achieve further development in the future.