Your Quarterly E-Zine
Edition 11 • December 2019

This website contains the latest edition of Forsyth Barr Focus, a quarterly on-line magazine written by senior members of Forsyth Barr's investment team.

If you experience any difficulty in accessing Forsyth Barr Focus,
please call 0800 367 227, or e-Mail editor@forsythbarrfocus.co.nz for assistance.

 

CHINA’S FINTECH GIANT

The rapid uptake and pace of technology innovation in China is creating one of the most exciting investment themes for 2017, and it’s all being led by China’s eCommerce giants.

Tencent's share price is up +70% in 2017 to the end of August, Alibaba up +90% and Baidu up +35%. While these three companies tend to grab the headlines in technology innovation, a company called Ping An is the new leader driving growth and investment in fintech services.

You may find yourself asking the question; What is fintech? Financial Technology, nowadays better known under the term 'fintech', describes a business that aims to provide financial services by making use of software and modern technology. 

In 2016, investment in China’s fintech firms more than tripled to a record US $10 billion, surpassing the US for the first time and accounting for 43% of investment in the global fintech sector. The Peoples Bank of China (PBoC) has been trying to facilitate this growth in fintech for several years, beginning in 2013 due to its expressed support for tech companies to promote internet finance.

Ping An has a market value of around US $150 billion, and was China’s first fully integrated insurance, banking and investment company.  In 2008, Ping An established Ping An Technology as it developed a funding source for the development of in-house information technology services for all its operations.

Incredibly, Ping An has been investing in excess of US $1 billion annually over the past few years ,incubating new businesses. This investment has enabled Ping An to develop four fintech ecosystems: i) Financial Services Ecosystems, ii) Health Care Ecosystems; iii) Real Estate Ecosystems; and iv) Auto Service Ecosystems.

In an article published by the China Daily (8 August 2017), it was noted that Ping An was budgeting to spend US $1.2 billion on technology research and development in 2017, with “artificial intelligence” being a core focus.  These applications will cover facial/voice recognition for loans, image recognition for housing and car insurance claims, plus a host of other AI applied services.

Today, fintech companies directly compete with banks in most areas of the financial sector to sell financial services and solutions to customers. Mostly due to regulatory reasons and their internal structures, banks still struggle to keep up with fintech start-ups in terms of innovation speed. Fintechs have realised early that financial services of all kinds – including money transfer, lending, investing, payments, need to seamlessly integrate in the lives of the tech-savvy and sophisticated customers of today to stay relevant in a world where business and private life become increasingly digitalised

Fintech is only one example of how China is rapidly embracing technology. Technology is driving change across most sectors including: manufacturing, industrials, financial services and consumer services. The funds being invested by Chinese companies are enormous, the plans comprehensive, and the vision is for the long term.

Rob Mercer
Head of Private Wealth Research