I joined a Clubhouse discussion the other day – Clubhouse? What? – and discussed Chinese FinTech and its impact on the rest of the world. I really enjoyed the conversation and it was nice that my friend Sophie Guibaud summarised it afterwards. I asked her if she would let me share it here on the blog and she kindly said yes, so, here it is:
Last week, I was fortunate enough to moderate a fascinating Clubhouse discussion about Chinese fintech that involved some of the leading thinkers on the topic.
First to speak was Chris Skinner, the renowned financial services author and commentator who most of you will know from thefinanser.com and as non-executive director of 11:FS. Chris was joined by Rita Liu, Chief Commercial Officer at Mode Group Holdings and a 10-year AliPay veteran, and Yassine Regragui, a fintech and China specialist who has worked for Deloitte, AliPay and AliBaba.
I was moderating with James Sherwin-Smith, GM of International Managed Services for Real-Time Payments at Mastercard, and we were joined later by Ron Shevlin, Managing Director for Fintech Research at Cornerstone Advisors, and Neel Garg, the fintech investor and advisor known on Twitter as @fintech_nerd.
For anyone who was unable to join, here are the key learnings I took from our 90 minute discussion.
Chinese fintech exists in Super Apps
While the UK and US have specific fintech apps, fintech in China lives within Super Apps.
Super Apps like AliPay provide a whole range of consumer services, including financial ones, in an end-to-end experience delivered through one platform. These integrated social, financial and commercial apps were allowed to grow in China but could also be shut down by the government if it chose to.
The breadth and depth of these Super Apps is far wider and deeper than elsewhere in the world and this is particularly true in terms of the scale they can achieve. For example, AliPay is used by 800 million Chinese people, which is more people than live in the whole of the US and the EU combined.
There were two major milestones that stood out in the development story of these Super Apps in China. The first occurred roughly a decade ago, when AliPay express payment was introduced to build direct connections with Chinese banks and establish a quality ecommerce experience. The second occurred from 2013, when AliPay added its Yu’e Bao money market fund, transforming the app into more than just a payments platform and marking the start of its journey to becoming a Super App.
This whole evolution means that it’s probably more appropriate to think more in terms of Chinese techfin, where technology companies offer financial services, than fintech.
Customers matter above all else
A ‘customer-first spirit’ has been an extremely important factor in transforming AliPay into a Super App and the focus that Chinese technology firms place on the customer is the driving force behind their evolution into Super Apps.
This is particularly noticeable when compared to European firms, who might focus on which financial services they can offer rather than which services their customers want.
As a result, Chinese Super Apps have developed into an ecosystem of consumer services that include both core and non-core businesses. This means that a user can access financial and other services that are offered by the platform, as well as those offered by partners like Uber and AirBnB. This is true for other Super Apps both inside and outside China, including WeChat, Grab and PayTM.
The concept of a consumer-focused ecosystem is crucial for Super Apps and is based on them responding to exactly what the customer wants and what the data shows. This is so much the case that, when asked about how AliBaba’s management works, CEO Jack Ma said the team is not managing a company but governing an ecosystem on a digital platform.
Finance is truly mobile-first
Just as these Chinese Super Apps are customer obsessed, they are also truly mobile-first.
The reason for this may lie in their emergence into a market where card providers had not established a dominant position. Before apps, cash was the dominant payment method in China, and this enabled mobile to leapfrog into pole position. Also, as mentioned earlier, card schemes weren’t paying attention to ecommerce a decade ago, which enabled AliPay to do something unique and significant.
The mobile-first experience was also important because it provided the ‘10x better’ experience compared to cash that PayPal pioneer Peter Thiel has identified as so important for disruptive technologies. Mobile payments are totally dominant in China now and have been since at least 2017, when it was already virtually impossible to pay at a local store with a western card. Quite simply, you pay with AliPay or you can’t pay.
One final interesting point to note about the mobile experience of these Chinese Super Apps is that, while they work for Chinese users, the user experience (UX) and user interface (UI) design probably looks complex to westerners.
Speed of innovation is key
The Chinese technology companies behind the Super Apps have huge ambition, capability, speed and agility that you won’t find anywhere else in the world, and their execution is second to none.
This is because of the brutal environment for product development that has developed in China, which can be thought of as a gladiatorial fight to the death, in which entrepreneurs learn to grow rapidly.
These companies need to make their product better at lightning speed, changing and optimising it for what the customer wants, while honing their business model until it is impregnable. As a result, the technology industry is constantly churning out new features at pace and this has played a huge part in the journey from niche services to Super App status.
It’s clear that this feature overload means there are some that are more important than others but it’s crucial that Super Apps make all the most important ones accessible from a single app.
For those looking from the outside, there are a couple of important feature trends within Super Apps that are worth noting too. Firstly, QR codes, which are widely used in China and could potentially form the foundations of a new payment network for Chinese users when abroad. Secondly, there is the ‘pay by smile’ functionality, which allows Chinese users to pay or access services using facial recognition alone.
Could the US have a Super App?
One of the most interesting points of discussion that developed was why the growth of Super Apps had occurred in China and Asia rather than in the US.
The equivalent in the US would look something like a merger of Facebook, Amazon and Paypal. The main reason this hasn’t happened is because the US government clearly wants to separate financial, commercial and social giants.
While the US doesn’t have any Super Apps, it does have companies with ecosystems that connect across industries. Amazon is probably the best example of this and is the company that comes closest to being a Super App because of these integrations.
It’s also important to remember that US technology giants have avoided trying to connect their apps because the market has not wanted them to. For example, Facebook has kept Instagram and Whatsapp separate because they’ve thought of the user groups as separate and wanting different user experiences.
Finally, it’s worth noting the move that Walmart is making into fintech right now, with the appointment of two Goldman Sachs bankers who have worked closely with the bank’s consumer division. However, this is more about Walmart focusing on cutting costs and improving its offer to low and middle income customers than it is about taking the first steps towards becoming a Super App.
Trust concerns remain
The main concerns that our Clubhouse participants brought up were focused on surveillance and privacy.
It’s worth considering that it might be a little naive to trust US companies like Facebook and Google to not abuse user data, while thinking the opposite of Chinese firms. After all, these US tech giants offer their products for free so they can sell data to advertisers and third parties.
For the most part, these Super Apps have a purely domestic focus, with AliPay being the main exception. It has moved into Asia, Africa and Europe, providing the technology behind mobile wallets for various fintech companies.
The lack of trust these firms come up against may to do with the fact that so few people outside China speak Mandarin. As so many people speak English, you are often not trusted if you’re not an English speaking company or nation.