Sino-Inno-Cap

Logo-Sino-Inno-Cap-01

Finance

Resource: “Fintech Companies in China | Full list 2022”, cfte.education, 2021

Global fintech companies raised a total of $29.3 billion in the first quarter of 2022, with a record median pre-investment valuation of $257.5 million, 44.5% higher than the average in 2021. [1] In 2021, China’s fintech industry remains a global leader, with achievements in terms of market size and application scenarios. [2] The amount as well as the number of funding of the fintech sector in China increased in 2021, and the overall level has surpassed the level in 2020.

In the first quarter of 2022, global fintech companies received a total of $29.3 billion in venture capital investment in 1,233 deals, with a 6.5% rate of decrease in the number of deals year-over-year and a 3.7% rate of decrease from the fourth quarter of 2021. [3] In terms of deal value, the global fintech sector had an increase rate of 13.8% year-over-year in 2021, and a decease rate of 7.3% from the fourth quarter of 2021. China’s fintech sector was recovering in 2021, with its financing amount reaching the lowest value in recent years due to the impact of the pandemic. It is worth noting that the number of fintech investment events in China was about 615 in 2018, and it reached the highest investment amount in the last six years. After the massive investments in 2018, the amount invested in China’s fintech greatly reduced after 2019.

The year 2021 is the closing year for the implementation of the FinTech Development Plan (2019-2021). [2] During the planning period, regulators issued a series of documents and policies on risk control and security, industry norms and standards, and industry supervision and management practices. Fintech standardization is gradually being strengthened. The central bank has issued and implemented technical standards for payment tokenization, payment information protection, acceptance terminal registration management, mobile terminal trusted execution environment, and mobile financial client application software. The “regulatory sandbox” continues to expand and the mechanism continues to improve. As of June 2021, a total of 90 projects of innovative pilot work in 9 regions nationwide were carried out. [2]

Banks, insurance companies, and securities firms estimated a total of 575.45 billion RMB (around $85 billion) to be invested by 2024. [4] The state-owned banks were investing heavily in fintech in 2021, with significant amounts and percentages. [5] ICBC (26 billion RMB, around $3.8 billion), China Construction Bank (23.6 billion RMB, around $3.5 billion) and Agricultural Bank (20.5 billion RMB, around $3 billion) all invested more than 20 billion RMB (around $2.96 billion). While the Bank of Communications invested less than 10 billion RMB (around $1.5 billion), it also maintained a high level of spending and invested the highest percentage of revenue in fintech (3.25%) among large state-owned banks. Investment in fintech by joint-stock banks was somewhat divided, with China Merchants Bank investing 13.3 billion RMB (around $2 billion) in financial technology, much higher than other joint-stock banks. Ping An Bank and China Merchants Bank invested 4.36% and 4.01% of revenue in technology, which was outstanding among large commercial banks.

The total investment of China’s top five banks (ICBC, China Construction Bank, Agricultural Bank, Bank of China and China Merchants Bank; by the amount of investment in technology) reached 102 billion RMB (around $15 billion) in 2021, a significant increase of 50% compared with 2019. Large banks have been investing in technology at a faster rate than the industry as a whole in recent years, and are the core force driving the technology upgrade and digital transformation of the banking industry. China’s fintech investment still has room for improvement compared to the big international banks. JPMorgan Chase, Citibank, Bank of America and Wells Fargo all spent more than 4% of their revenue on technology in 2021, with leaders such as JPMorgan Chase/Citibank reaching more than 8%, or $9.9 billion/$7.8 billion respectively, much higher than the top five banks in China. In the future, financial institutions’ technology investment and digital innovation practice in China are expected to primarily focus on three areas: fundamental technology construction and upgrading, business demand-oriented digital practice, and creative practice based on digital financial infrastructure. [4]