Date
16 December 2017
An increasing number of Chinese consumers are getting used to making online payment for goods and services. Photo: Wechat
An increasing number of Chinese consumers are getting used to making online payment for goods and services. Photo: Wechat

Why China’s tech titans temper their fintech ambitions

China is at the forefront of the booming global fintech industry. While tech behemoths like Alibaba and Tencent seem to be conquering one area after another, they both hinted at scaling down their fintech development all of a sudden.

Tencent Holdings reported its revenue jumped 47.7 percent and net profit soared 42.7 percent last year from the year before.

Among different reporting segments, “others”, which cover mobile payment and cloud services, reported the highest growth clip of 289 percent. This section now accounts for 11 percent of its total revenue.

As more Chinese are getting used to making online payment for goods and services through Weixin, the average daily number of payment transactions made through the Tencent service exceeded 600 million in December last year compared with the daily average number of 500 million transactions the company disclosed in May last year.

Surprisingly, Tencent president Martin Lau said in an earnings conference that “we view mobile payment as infrastructure investment rather than a way to make profit”.

Meanwhile, Ant Financial Service Group, backed by Jack Ma’s Alibaba Group, told a press conference this week that the company would focus on technology development in data and operation to support growth of financial institutions.

In fact, both Tencent and Alibaba were very ambitious in venturing into the financial sector until late last year. Both planned to expand into banking, brokerage, fund management and insurance. They were set to compete with traditional financial firms across the board. It’s quite interesting that both have suddenly changed their strategy.

It is said that the rapid growth of fintech has rattled authorities, who fear that tech firms’ encroachment into areas traditionally dominated by big lenders and insurers could threaten the stability of the financial system.

Banks, for insurance, need profits to cushion against bad debts and exposure to a red-hot property market.

So the finance sector can heave a sigh of relief for the time being. Still, it has to brush up on its fintech capability as authorities won’t hold back tech firms for too long.

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RT/RA

Hong Kong Economic Journal columnist

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