It looks like the Chinese fintech arms race is starting to get interesting.
According to the South China Morning Post, Chinese commercial banks have ramped up their fintech investments as the likes of Tencent and JD.com slowly “chip away at their businesses.” China Construction Bank reportedly increased fintech development to 2.2% of operating income in 2018 – a 22% climb from the previous year – while China Merchants Bank saw its IT expenses surge to 2.3% – an over 35% rise from the year before.
They’ve also seemed to expand their capabilities: despite not having dedicated fintech units, several of the nation’s Big Four banks have launched retail and corporate banking services in the Greater Bay Area (GBA), seeking to deliver cross-border services via digital banking, while China Construction Bank has developed an app that connects builders, apartment owners, and tenants in the GBA – while offering loans through the app, naturally.
China Merchants Bank meanwhile “has taken part in the development of the People’s Bank of China-led trade finance blockchain platform in the GBA. The Shenzhen-based bank has also worked with the construction industry on a blockchain-based centralised procurement supply chain finance platform.”
The banks have also seemed to have found a way around one of their biggest challenges: poaching or recruiting talent from tech firms. For whatever reason, banks seem to have always been on the back foot when it comes to recruiting for tech jobs. By spinning off their fintech arms however, they give themselves a little bit of leeway:
Observers say Chinese banks’ decision to set up fintech units stems from the fact that, through an independent unit, their management would have more flexibility in recruiting talent with attractive pay packages on par with those offered by private tech companies.
How this all translates to the current arms race is still unclear, though obviously every little bit helps them survive a little bit longer.
Photo: Sharon Hahn Darlin