Beijing GMIC/1 -Mobile payments and digital finance are disrupting China’s financial sector

Pubblicato il 08 Mag 2014

GMIC is the Global Mobile Internet Conference that touches four cities every year: Beijing, Tokyo, New Dheli and San Francisco. Marco Gervasi reports for Startupbusiness from the 2014 Beijing event.

Alibaba last year launched Yuebao. It is a simple financial instrument that pays a 6% annualised return. Yuebao has given a rude awakening to China’s banks. Looking at the shibor index (the most important interest rate used in China’s money market today), as the interest decreased, people moved their savings massively into Yuebao. In 2008, Alibaba set up another blockbuster, its own payment platform Alipay. Alipay, has transformed Taobao (the famous Chinese C2C website) into the biggest ecommerce marketplace in the world. What makes Internet companies able to successfully enter the financial world?

Businesses and payments have always been a successful combination. For example, in 15th hundred century, Holland used to be the greatest ship builder in the world. To support the growth, Amsterdam launched a bank, which soon became the strongest in the world. When England launched the industrial revolution, it developed bigger banks than the Dutch. Looking east, Shaanxi province in China is famous for its resources. However, not everyone knows that due to its massive salt trade, it developed a successful banking and payment system to support the trade. Therefore, what is now happening to Internet companies should not be surprising. They bring the business and create the system to support it.

Digital finance and mobile payments are not exclusively a China invention. Google launched in 2011 its own system called Google Wallet, and Apple is developing its own system. However, what makes China interesting is that mobile finance leapfrogging the traditional financial system development. Financial institutions have been operating in the USA for centuries, while China’s financial system is still lagging behind.

The combination of Internet and mobile adoption allows now individuals in 3rd and 4th tier cities to benefit from services they had no access before. This is the biggest disruption brought by the Internet. Mobile payments and digital finance may reach people before banks do. It will eventually replace POS machines. People will simply use their mobile wallet to purchase. 

 Contributor: Marco Gervasi

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