How China and India are Learning from Each Other’s FinTech Companies
All over the world, FinTech seems to be rising at breakneck speed. Regardless of whether you’re in New York, London or Montreal, there is a major interest shown by investors towards enterprise-level FinTech companies that strive to revolutionize the entire financial industry. In fact, 2021 saw the number of deals double from 2020 with China investing heavily in startups that are trying to offer a new experience at a low cost and high-security measures.
What do these investments come down to? Well, according to experts, two countries are actually leading the way: China and India.
While the former is being seen as the ‘top dog’ in Asia, India’s FinTech market is still growing at a rapid rate. Here are some facts about these two countries:
Why China Is Leading FinTech In Asia
Earlier this decade, Beijing surpassed London when it came to FinTech investments with Hangzhou the following suit. It’s the first time since 2012 that London hasn’t been at the top. According to figures from KPMG and CB Insights, Australia is in third place in terms of FinTech investments- the biggest raises are seen in payments and lending.
China has succeeded in attracting investors because it is seeing more value in this particular industry. Because of the sheer size and its population, more investors are looking for companies that offer quick growth potential- which is exactly what China has to offer in terms of FinTech.
Besides that, it’s important to note that China doesn’t tax capital gains (at least not until 2018) so investing through this sector is actually quite cheap apart from being rewarding. This is because the government wants to support a new economy- one that is more technology based and innovative.
This is partly why Chinese companies are also trying to gain more interest from Europe, with some successful cases: Ant Financial has acquired MoneyGram and PayPal has invested in WeChat Pay (the mobile payment app developed by Tencent Holdings).
Why India Is Also Going Strong In FinTech
The Indian FinTech sector is also growing at a rapid pace. It has already reached $21 billion in annual volume so far, which is quite impressive for an underdeveloped market. The Bank of Baroda, Yes Bank, and ICICI Bank have shown a great deal of interest in new technologies like AI and mobile payments.
Even though the Indian government has been rather strict when it comes to startups, there is still an amicable relationship between banks and FinTech companies, meaning that they are learning from each other as well. Some experts say that this is the ‘start of a long-term relationship’ and that we are just seeing ‘the tip of the iceberg’ for what FinTech can be in India.
How Can Tech Giants Learn From Each Other?
Both China and India have started a massive shift towards an e-economy. In fact, this year both countries invested over10 a billion USD in this sector, the highest amount ever recorded. At the same time, both countries are also working on expanding their economies and building a more efficient government.
The big question here is whether or not China and India will be able to compete with Silicon Valley in terms of FinTech– as well as other tech giants like Apple, Google, and Microsoft. For now, it seems that China is leading the way when it comes to FinTech throughout Asia while India isn’t too far behind.
Scene Of FinTech Development In These Countries
One of the biggest changes we’ll see in FinTech development is how both countries will integrate their own culture and traditions into this sector. This means that they are going to be more inclusive and open towards other systems, like branches or offices that are located outside of these two countries.
Besides, another big change we’ll see in terms of FinTech is how these two countries will compete with the global tech giants. This means that they are going to look into centralized and decentralized systems– both of which already exist in the market. The deal Chinese companies have made with WeChat Pay proves just that- Ant Financial having integrated Alipay into WhatsApp, Facebook Messenger, and other similar services.
What To Expect From These Countries By The End Of 2021 And Beyond
The financial technology sector is expected to grow exponentially- both in China and India, due to a strong push for the rest of the world. Because of this, we are going to see more investments towards tech companies that can offer new solutions, involving relationships between banks and FinTech startups.
Furthermore, it’s important to note that both countries are going to focus on enhancing their tech capabilities as well. This is partly because big companies need this sort of infrastructure in order to compete globally which means that governments jumped on the opportunity in funding them. China has already invested US$10 billion for the development of its AI sector, which is five times more than the United States. They plan on increasing it to US$150 billion over the next ten years.
There’s also India where tech giants like Amazon and Google have been heavily investing l. Because of this, we can say that both countries are going to compete for the tech throne in Asia in the near future.
The Booming FinTech Industry
India and China are at the forefront of booming FinTech industry. The companies in these two countries are making strides to provide better, faster, cheaper financial services to consumers. With these two powerhouse nations in the mix, it’s possible for FinTech to reach even more people- from developing countries to developed ones. Let’s explore what we can learn from this!
Lessons from the Boom in FinTech
First off, both India and China have a 1 billion+ population with differing needs and attention when it comes to financial services— from microlending/micro-savings accounts for those living below the poverty line to mortgages & loans for the middle class. This diversity makes them perfect markets for startups looking to cater their products or solutions specifically towards one country or region over another. For example, a company named Tala wanted to grow in the US and shared its story on TechCrunch
Why didn’t they look at India or China first? The answer is obvious– scalability.
Building one product for such a huge market means that you’re focusing more of your time and energy (which can often be scarce for early-stage startups) to solve one problem. When you try to go after the golden goose, all eggs in that basket may not hatch and your company could crash and burn. India has its own homegrown FinTech ecosystem where companies like PayTM and PhonePe have really taken off– backed by Alibaba. While Chinese FinTech seems to be more homegrown, there are also some well-known companies like Ant Financial that show promise.
What do India and China have in common?
Both countries have a huge population with specific needs when it comes to financial services. The problem is that both economies are growing at an exponential rate which means that they need more capital flowing in from sources like VCs/Angel investors in order to keep the ball rolling. What happens when China and India get along? When two economies are doing so well, it is only natural for them to look towards each other as they search for funding options.
There’s no better way to make a company global than by having money from foreign sources invested in your business. The best part about it is that the money will eventually re-enter the economy. Both countries are trying to create sound regulatory environments in order to encourage innovation while protecting investors and their capital.
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