China has outpaced leading global fintech centres such as London, New York and Silicon Valley to become the global fintech leader, driven by the country’s unmet consumer financial needs and regulatory facilitation, according to a collaborative report by DBS and EY.

The report, The Rise of FinTech in China, revealed that the fintech growth in China is supported by the size of the market opportunities present in the country’s financial services ecosystem. The country’s GDP in 2015 stood at $10.9trn, which nearly equates to the aggregate of the next 10-largest emerging markets.

Also, continuous economic growth is increasing the ranks of the middle class, with this segment expected to rise to one billion, or 70% of the country’s projected population by 2030. This will give rise to a large consumer base with massive spending power and unmet financial needs.

DBS chief innovation officer Neal Cross said: “The speed at which China’s FinTech landscape has developed is truly remarkable. It’s gotten this far because China’s landscape has operated in a sandbox-like environment conducive for fintech to thrive — a strong domestic market, coupled with a constant push for innovation and experimentation driven by leading giants, unhindered by international influence. Much of this can be attributed to the favorable government policies and regulations.”

The factors driving the exponential growth of fintech in China include a government-backed push into digital penetration, consumers’ propensity toward digital adoption, as well as a large presence of digital natives who are open to digital adoption with less security concerns, the study revealed.

For example, 40% of Chinese consumers use new payments methods as against only 4% in Singapore, and 35% use fintech for insurance products versus only 1%–2% in several Southeast Asian markets.

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China also has higher rates of fintech participation in wealth management and lending.

EY Asia-Pacific fintech leader James Lloyd said: “Chinese FinTech development is primarily characterised by the sheer scale of unmet needs and the opportunities they present. In addition, new providers are typically not constrained by the legacy infrastructure or regulations present in more developed markets.

“China’s unique mix of rapid urbanisation, massive (and underserved) market, e-commerce growth, explosion in online and mobile phone penetration, and customer adoption willingness have created a fertile ground for innovation in commerce, banking and financial services more broadly.”