In this relatively long piece that is posted at FinTech mag, the author describes some of the recent regulatory moves that have been occurring in China with regard to financial services and fintech players, which some readers may be familiar with. Although we expect that things had started earlier, the crackdown basically started in late 2020 as Ant Group was preparing an IPO and Jack Ma made some criticisms of the Chinese regulatory approach. The IPO was quashed and parent Alibaba has lost about half of its market value since then. Jack Ma has all but disappeared from public visibility, except for a few appearances here and there.
‘But over the past few months, Chinese regulators have taken significant steps to restrict the largely unfettered fintech activity that has boosted the economy… China’s approach to regulating fintech has been three-fold. Firstly, financial businesses must be licensed to operate. Secondly, different businesses such as insurance and wealth management must set up firewalls to prevent cross-sector risks. Finally, the direct link between non-banks and banking information services must be cut…
The central bank has also required fintech businesses to set up holding companies and to include all subsidiaries engaged in financial activities… A series of strict measures on fintech regulation have also been implemented. On November 1st, China’s new law on personal data protection came into effect. In September the Data Security Law was introduced, and in January, the central bank tightened its regulation of non-bank payment providers, effectively restricting their activities in the swiftly growing payments sector…
The previously free-wheeling fintech space seems to have been reined in with sudden effect and commentary in the space shows some companies have felt the pinch.’
The remainder of the piece is basically an interview with the CEO of LianLian Global, one of China’s leading cross-border payments companies, which is a partner for Amex in their card processing licensing venture in China. It is worth reading through to understand better how those financial services companies doing business in China must always be ready for something unexpected, and adapt to local preferences. The piece eventually ends up with discussions around cross-border payments opportunities.
‘“I’m excited,” he says. “I think this is a very exciting time in China. B2B cross-border trade is a huge area where fintechs can disrupt and innovate and provide new solutions. I think, particularly for us, we have very strong global banking partnerships with banks like Citi and Deutsche Bank. We’re engaged with them in saying, how do we collaborate? Fintechs and banks, how do we create new solutions to issues that have been around for a long time?”…
He adds, “I think the cross-border space, in general, is not China-centric. So it’s supporting cross-border flows, whether they are from Vietnam or Thailand to Brazil or Europe to Singapore. The key is always that you’ve got to have local teams, local licenses to be able to not just have core innovations, but actually, be able to localise them effectively.”’
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group
