FinTechs in China – with a special focus on peer to peer lending
| Pages | 215-228 |
| Published date | 02 October 2017 |
| Date | 02 October 2017 |
| DOI | https://doi.org/10.1108/JCEFTS-06-2017-0015 |
| Author | Caroline Stern,Mikko Makinen,Zongxin Qian |
| Subject Matter | Economics,International economics |
FinTechs in China –with a special
focus on peer to peer lending
Caroline Stern
Oesterreichische Nationalbank, Wien, Austria
Mikko Makinen
Bank of Finland, Helsinki, Finland, and
Zongxin Qian
Renmin University of China, Beijing, China
Abstract
Purpose –China is a country with the most number of operating peer-to-peer (P2P) lending platforms
(approximately 2,000) worldwide. This study aims to provide an overview on FinTechs in China. It was
examined why payment servicesand P2P lending are so popular in China and what are the determinants for
the emergenceof P2P lending platforms in different provincesin China.
Design/methodology/approach –This study conducteda descriptive analysisof P2P lending in China
and an empiricalanalysis of determinants of P2P lending in China.
Findings –This descriptive analysis shows that the surge in the number of the P2P platforms in China
follows an inverted U-shaped phenomenon. However, the outstanding balances of P2P lenders is still
increasing, while average yieldsof P2P lenders have sharply plunged. The empirical findings indicatethat
P2P lending is more extensive in the region with more mobile phone subscriptions; outstanding balance of
P2P lenders in region is negativelyassociated with the size of traditional bankingsector; and the number of
the P2P platforms in negatively related to the fixed assets investments in region, whereas average yield is
positivelyassociated with the fixed assets investments.
Originality/value –Currently, almost no research paperswith empirical analysis of FinTechs, especially
P2P lenders,exist. This study estimates a simple model to find determinantsof P2P lending.
Keywords Banking, Shadow banking, P2P lending
Paper type Research paper
1. Introduction
Digitalization in the banking sector recently experienced a new twist with the emergence
of thousands of start-ups worldwide. These innovative financial technology companies,
FinTechs, provide novel financial services; some of these start-ups have already grown to
remarkable proportions like Alibaba, Amazon and Google. Although a common
perception is that business models of FinTech companies focus on payment services and
lending, they also encompass personal financial advisory services, crowdfunding, virtual
currencies, InsurTech, RegTech, BigData and security (e.g. cyber security). Moreover,
FinTechs explore new business areas on a continuous basis, and some of these financial
innovations may have the potential to disrupt the financial system as we know it.
Traditional banks recognize this development in financial technology and have started
their own digitalization projects.
It is also noteworthy that some of thesenew technologies seem to gain market shares in
lending faster in emerging than in developed countries. One example is China, which is a
country with the most number of operating peer-to-peer (P2P) lending platforms
FinTechs in
China
215
Journalof Chinese Economic and
ForeignTrade Studies
Vol.10 No. 3, 2017
pp. 215-228
© Emerald Publishing Limited
1754-4408
DOI 10.1108/JCEFTS-06-2017-0015
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