• Bonnie Buchanan and Cathy Cao

Quo Vadis? A Comparison of the Fintech Revolution in China and the West

In the available literature, there is a dearth of papers providing a cross-country comparison of Fintech development. In our recent SWIFT Institute paper, ‘Quo Vadis?: A Comparison of the Fintech Revolution in China and the West’, we fill that gap by comparing the evolution of Fintech in China with three Western markets (US, UK and Sweden). The countries chosen represent very different legal (common versus civil law) and cultural frameworks.

Four key factors are driving Fintech innovation in the global financial services industry:

  1. Consumer behavior and expectations in regard to financial services have changed.

  2. Artificial intelligence (AI), cloud computing and big data have created an affordable infrastructure.

  3. New currencies (esp. the promise of digital currencies) and credit systems have impacted investment and banking.

  4. Due to mobile phone and other improved access methods, the barriers to entry in the financial services industry are being reduced.

China and the West are at different stages of Fintech maturity. China has moved well beyond the tipping point and now represents the largest single Fintech market in the world. Historically, China has been a market underserved by the traditional banking sector and this is reflected in quite different Fintech models. The Chinese Fintech unicorns focus on customer oriented business models, known as business to customer (B2C). This differs from the European case (including Sweden) which focuses on business to business (B2B) models.

China’s Fintech success derives not just from a technological advantage and unprecedented innovation, but also from integrating finance and real-life needs. Since most Chinese consumers have access to financial services through their mobile phone and there are no universally available legacy systems, FinTech has a huge advantage over brick and mortar banking. Fintech has also grown faster in China relative to the West in three particular areas: P2P lending; mobile payments and artificial intelligence. This paper emphasizes these three areas in a Chinese context. In the paper, we link differences in the Chinese and Western Fintech sectors to variations in legal, political and cultural regimes.


In China, the P2P lending industry has experienced phenomenal growth. P2P platforms focus on four industry segments: consumer lending, small business lending, auto loans and real estate lending. Products offered by Chinese P2P platforms can include anything from loans for wedding celebrations, guaranteed by cash gifts that couples expect to receive, to high-yield lending for risky property or mining projects.

The Chinese P2P lending market has faced multiple challenges due its meteoric growth, the lack of regulations and risk management, as well as severe information asymmetry problems. Over the past decade there have been 5,962 P2P lending platforms formed, of which 4,008 experienced serious problems like halted operations, disputes, frozen withdrawals, executives who absconded, business transition, and criminal investigations. P2P lending across the markets we study has faced various challenges as well, including some very public cases (we include mini-cases from all four markets), resulting in closures.

Many Chinese cities have become cardless and cashless due to the ubiquity of mobile payment facilities. The rapid growth of China’s third party mobile payment system is attributable to a number of factors. In China mobile cellular phone subscriptions have been growing at a faster rate than in the US, UK and Sweden. Second, in China 95% of internet users now go online through mobile equipment. While Sweden is also rapidly moving towards becoming a cashless society, this has not been without some backlash.

A number of factors explain the increasing dominance of China in the AI area. All three of the BATs (Baidu, Alibaba and Tencent) are investing heavily in AI. These factors include: scale; vast amounts of data; and two prominent technologies: facial recognition and AI chips.

Bonnie Buchanan, Hanken School of Economics, Finland and Seattle University, USA

Cathy Cao, Seattle University, USA

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