The China Internet Development Foundation and the Chinese Financial Association of Hong Kong recently signed an agreement on fintech cooperation.
In a blog post, Norman Chan, chief executive of the Hong Kong Monetary Authority, said: “One of the advantages of the peer-to-peer (P2P) business model is that it substantially lowers the threshold for loans. Through the P2P platform, individuals might find lenders for microcredit and unsecured loans that banks in general would not be interested in.
“For lenders, rather than depositing money in a bank for modest interest income and letting the bank lend out the money, the P2P provides an alternative investment to lenders, allowing them to lend out the money directly and profit from the interest rate spread.”
The P2P lending platform may replace the intermediation role of banks by matching the supply of, and demand for, funds.
With increasing competition from P2P and online payment platforms, banks should put more effort in making their services online to maintain their market share.
Fintech is a new business that can be a meaningful supplement for the traditional finance industry.
It mainly targets small businesses, providing them with fast, convenient and small-sized financing services.
Given the fact that China has a big shadow banking system, healthy development of fintech businesses can help drive private capital to the financing industry and serve the real economy.
Hong Kong, although an international financial center, has lagged behind in fintech development.
It didn’t have any P2P lending platform until WeLend was launched in July last year.
With the above-mentioned agreement, Hong Kong peers are expected to have deeper engagement in the development of China’s fintech businesses, in terms of fund-raising, talent communication, organizational cooperation, etc.
This article appeared in the Hong Kong Economic Journal on May 3.
Translation by Myssie You
[Chinese version 中文版]
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