10 October 2018

Quo Vadis? A Comparison of the Fintech Revolution in China and the West

This research compares the evolution of Fintech in China with three Western markets (US, UK and Sweden). The countries chosen represent very different legal (common versus civil law) and cultural frameworks.

Four key factors are driving Fintech innovation in the global financial services industry:

  1. Consumer behavior and expectations in regard to financial services have changed.
  2. Artificial intelligence (AI), cloud computing and big data have created an affordable infrastructure.
  3. New currencies (esp. the promise of digital currencies) and credit systems have impacted investment and banking.
  4. Due to mobile phone and other improved access methods, the barriers to entry in the financial services industry are being reduced.

China and the West are at different stages of Fintech maturity. China has moved well beyond the tipping point and now represents the largest single Fintech market in the world. China is a market that has historically been underserved by the traditional banking sector and this is reflected in quite different Fintech models. The Chinese Fintech unicorns focus on customer oriented business models, or known as business to customer (B2C). This is different compared to Europe (including Sweden), which focuses on business to business (B2B) models.

China’s Fintech success derives not just from a technological advantage and unprecedented innovation, but also from integrating finance and real-life needs. Since most Chinese consumers have access to financial services through mobile phones and there are no legacy systems, FinTech has a huge advantage over brick and mortar locations. Fintech has also grown faster in China relative to the West in three particular areas: P2P lending; mobile payments and artificial intelligence. This paper links differences in the Chinese and Western Fintech sectors to variations in legal, political and cultural regimes.


  • In China, the P2P lending industry has experienced phenomenal growth. P2P platforms focus on four industry segments: consumer lending, small business lending, auto loans and real estate lending. Products offered by Chinese P2P platforms can include anything from loans for weddings, guaranteed against the cash gifts that couples expect to receive, to high-yield lending for risky property or mining projects.
  • The Chinese P2P lending market has faced multiple challenges due to its meteoric growth, the lack of regulations and risk management, as well as severe information asymmetry problems. Over the past decade there have been 5,962 P2P lending platforms formed, with 4,008 of them facing problems such as halted operations, disputes, frozen withdrawals, executives who absconded, business transition and criminal investigations. P2P lending across the US, UK and Sweden have faced various challenges as well, including some very public cases.
  • Many Chinese cities have become cardless and cashless due to the ubiquity of mobile payment facilities. The rapid growth of China’s third party mobile payment system is attributable to a number of factors. Mobile cellular phone subscriptions have been growing at a faster rate than the US, UK and Sweden. 95% of Chinese internet users now go online through mobile equipment. Sweden is rapidly moving towards being a cashless society (but it has not been without some backlash).
  • A number of factors explain the increasing dominance of China in the AI area. All three of the BATs (Baidu, Alibaba and Tencent) are investing heavily in AI. These factors include: scale; vast amounts of data; and two prominent technologies – namely facial recognition and AI chips.

by Bonnie G. Buchanan, Cathy Xuying Cao

  • Albers School of Business and Economics Seattle University
  • Hanken School of Economics