Fintech shows the way forward
Release Time：2019-03-18 | Source：China Daily | Author：Huang Yiping
China's third-party payment service providers are leading cross-border financial services cooperation
The Belt and Road Initiative offers a new cooperative approach to the world's economic development. However, there remain concerns about the initiative - some worry that China is exporting the so-called Chinese model through the initiative; some say that China aims to use it to resolve domestic overcapacity; some criticize China for creating "debt traps" in developing countries; and some point their finger at China for subverting the existing world economic order.
Most of these doubts are groundless, but they do remind us that we have overemphasized the importance of telling "Chinese stories" while neglecting the original purpose of initiative which is win-win cooperation. We should improve the initiative in multiple aspects, such as specifying the basic rules and implementation procedures, and draw lessons from successful practices in global collaboration.
Global cooperation in fintech is a good example. It has achieved satisfactory results in countries along the Belt and Road and benefited ordinary people in those areas.
China's leading third-party payment service providers WeChat and Alipay have launched cross-border payment services in many countries, offering Chinese consumers convenience overseas. Through cooperation with foreign counterparts such as Paytm of India, True Money of Thailand, and bKash of Bangladesh, Alipay has successfully promoted its financial services in these countries.
The cooperation in this sector is still in its infancy, but it offers some valuable experience.
First, the demand for financial services from the Belt and Road countries is huge, serving the foundation for fintech cooperation. The traditional financial sector has not provided adequate financial services to customers, especially to small and micro businesses and low-income earners. For example, the penetration of credit cards is lower than 20 percent in China. In Bangladesh, workers from rural areas have to send money back home via truck drivers passing by, which is risky and costly. The development of China's financial technology has been greatly driven by market demand as well as technological progress.
Second, with China now at the forefront of global fintech innovation, many countries show a strong will to cooperate with Chinese enterprises. According to the World Bank's Global Findex Database, China ranks second in financial inclusion, next only to the United States. And many financial technologies applied in China are more suitable for developing countries. In November last year, dozens of senior executives of fintech companies from the United Kingdom paid a group visit to China; in June 2018, the International Monetary Fund invited the Institute of Digital Finance of Peking University and the Shanghai Finance Institute to attend a closed-door symposium on fintech held in Washington. These exchanges demonstrate China's growing influence in financial technology.
Third, global cooperation in this sector has so far largely been driven by the market rather than government. It helps dispel unnecessary doubts in countries where international financial cooperation is regarded as a sensitive issue. Chinese fintech companies' mature technologies help these countries develop digital payment systems that fit local technologies, cultures and policies. For example, thanks to its collaboration with Alipay, Paytm of India saw its user numbers soaring to above 200 million in one year.
Last but not least, international fintech cooperation is a beneficial process of mutual learning. China has learned a lot from the cooperation. For instance, in terms of financial regulation, Singapore has set a good example in formulating an overall plan for fintech development; and the Regulatory Sandbox, an initiative that lets financial service providers experiment with innovative financial products and services, launched by the UK, Thailand and Singapore, offers experience to Chinese financial regulators in balancing innovation and risk.
China's fintech global cooperation has been largely driven by companies' pursuit of profit. Such cooperation is neither aimed at fulfilling political tasks nor supported by government subsidies. The low-profile gesture of Chinese fintech firms in overseas markets sets a good example in avoiding political intervention in global cooperation.
The government should assist, not lead. Although the Belt and Road Initiative was put forward by the Chinese government, improved interconnectivity in the area must be based on business sustainability.
Currently, the government has not played an important role in fintech global cooperation. However the government can safeguard the healthy development of the industry by helping fintech firms regulate their business model and improving the regulatory framework.
Fintech global cooperation also helps countries along the Belt and Road boost interconnectivity. Cross-border payments are being used in many countries, facilitating international leisure and business travel. Using blockchain technology, the real-time cross-border e-payment service provided by AlipayHK has opened up a new possibility in financial interconnectivity. If e-wallets in different countries can be linked together, it will greatly facilitate the cross-border payments of individuals and small and micro businesses. It promises to elevate inclusive finance to a higher level, and supplement the SWIFT cross-border payment service for commercial banks.
The author is a professor with the National School of Development, Peking University; and director of the Institute of Digital Finance at the same university. The author contributed this article to China Watch, a think tank powered by China Daily. The views do not necessarily reflect those of China Daily.
(China Daily 03/18/2019 page13)