Over the past few years, China has enjoyed rapid growth in mobile payments, asset management, and online lending, as shown below. Now, fintech giants like Ant Financial are encroaching upon traditional banks with innovative business models and go-to market strategies. Consequently, Ant’s consumer lending hit a new high of $95 billion in the first quarter and its share of money market funds jumped to 28% through its Yu’e Bao platform.
Source: Financial Times
This week, the PBOC issued new regulations to lower risks to the Chinese economy, including capital outflows and other illegal drainage. The regulations include:
- New ceilings on asset management products.
- No guarantees on the rate of return from asset managers.
- A ban on unlicensed lending.
- No violence, intimidation or insults as micro-lenders seek to collect payments.
- The privacy protection of customer information.
- No online micro-loans unless proceeds are earmarked for a specific purpose
Following these changes in regulations, fintech companies have been moving cautiously by limiting subscriptions and capping the investable amount. While potentially slowing growth in the short term, these regulations should weed out nefarious and unreliable players in the financial services industry, adding confidence and stability to the industry.
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