1209 Professor BEI, Duoguang Dr. MO Xiugen Chinese Academy of - PowerPoint PPT Presentation

CGAP April 14, 2017 Washington D.C., US Digital Financial Inclusion in 中国数字普惠金融 China 指标与监测体系 即 “ 1209 项目” Professor BEI, Duoguang Dr. MO Xiugen Chinese Academy of Financial Inclusion, RUC

Contents Current Status Why is China running ahead? Why are Fintech Unicorns running ahead? Implications to Financial Inclusion? Where to go (bearing the challenges)? Implications to Other Countries

1. Current Status 1.1 Digital China Phone Subscribers in China 96.2% 15% Data Ministry of Industry and Information Technology

1. Current Status 1.1 Digital China Internet Users Mobile Internet Users 800 60.00% 800 100% 90% 700 700 50.00% 80% 600 600 70% 40.00% 500 500 60% 400 30.00% 400 50% 40% 300 300 20.00% 30% 200 200 20% 10.00% 100 100 10% 0 0.00% 0 0% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 No. of Internet Users (million) Internet Penetration (%) Mobile Internet Users (million) Mobile Internet User as % of Internet Users Data: China Statistical Report on Internet Development (2017), China Internet Network Information Center

1. Current Status 1.2 Digital Payment Payment Data: iResearch

1. Current Status 1.2 Digital Payment Payment Chinese Style of Payment QR Code • Not NFC • Loose regulation • Low requirement on • technology Easily replicated • Highest popularity •

1. Current Status 1.2 Digital Payment Payment 600mn 889mn Data: Ant Financial and JD Finance

1. Current Status 1.3 Digital Micro-Financing Micro-Financing Leverage big data. • Example 网商银行 By End 2016, served over 5 • million micro-businesses, total Mybank. credit over 900 billion RMB. Average loan 20,000 RMB. com • Ant Financial “Wang Nong Dai”, covers 24 Supply • Consumer Ant Credit Pay (Hua Bei) provinces, 139 counties and • Chain Ant Cash Now (Jie Bei) 2425 villages by mid-2016. Finance • Financing Over 100 million users Average loan size 44,000 RMB. • “Meng Yang” Project • Data: Ant Financial

1. Current Status 1.3 Digital Micro-Financing Digital-Financing P2P Lending Activities in China 1000 25.00% 900 800 20.00% 700 600 15.00% 500 400 10.00% 300 200 5.00% 100 0 0.00% 2014-01 2014-02 2014-03 2014-04 2014-05 2014-06 2014-07 2014-08 2014-09 2014-10 2014-11 2014-12 2015-01 2015-02 2015-03 2015-04 2015-05 2015-06 2015-07 2015-08 2015-09 2015-10 2015-11 2015-12 2016-01 2016-02 2016-03 2016-04 2016-05 2016-06 2016-07 2016-08 2016-09 2016-10 2016-11 2016-12 2017-01 2017-02 Transaction Value (billion) Outstanding Loans (billion) Net Cash Inflow (billion) Expected Yield (right) Data: Public sources, such as www.wdzj.com

1. Current Status 1.4 Digital Wealth Management Wealth Management Rong360 WM Platform No. of Products Assets Under Management (billion RMB) 40 1200.00 35 1000.00 30 800.00 25 20 600.00 15 400.00 10 200.00 5 0.00 0 Developed by Developed by Developed by Developed by Developed by Developed by Developed by Developed by Banks Security Firms Telecom Operators Fintech Firms Banks Security Firms Telecom Fintech Firms Operators Data: Public sources, such as rong360.com

1. Current Status 1.4 Digital Wealth Management Wealth Management Return of 10,000 7-Day AUM Minimum Ant Financial Product Issuer Investment during Annualized (billion RMB) Investment Last Day Return Yu’e Bao Yu’e Bao Alipay 808.29 1.04 3.87% 1 RMB The largest online funds Cash Express ICBC Credit managing 808.29 billion 115.20 0.99 3.54% 0 RMB (Xian Jin Kuai Xian) Suisse Fund RMB for more than 300 million clients by Mar- How Buy Piggy Bank How Buy 2017. 115.20 0.99 3.54% 1RMB (Hao Mai Chu Xu Guan) Fund Huaxia Huo Qi Tong ChinaAMC 55.77 0.93 3.59% 0 RMB Individual clients takes 99%, 70%+ invest 1000 RMB or less. Baidu Bai Zhuan Baidu 55.77 0.93 3.59% 1 RMB Data: Public sources, such as rong360.com

1. Current Status 1.5 Digital Insurance Insurance 2012-2015 Chinese Insurance Market (billion RMB) 3000 10% 9% 2500 8% 7% 2000 6% 1500 5% 4% 1000 3% 2% 500 1% 0 0% 2012 2013 2014 2015 Insurance Income from Internet Insurance Income from All Sources Ratio of Internet Income (right) Data: Insurance Association of China

1. Current Status 1.6 Digital Credit Scoring Credit Scoring Self-Escalating Process E- Commerce Financial Financial Financial Services Service -- Service -- Credit Payment Financial Service -- Information Financial Services Credit Collected Scoring

2. Why is China Running Ahead? Well-developed Infrastructure • Such as affordable and available smart phones, 4G networks, internet services, etc. • Widely available distribution logistics, express delivery to foster e-commerce development Friendly Regulation • Tolerable regulation • Develop before regulate Innovative Spirit • Combine modern technology with traditional Chinese Customs such as "Red Envelopes" Large Population and Market Size and Unmet Financial Needs • Traditional financial services focus on high-end customers • Huge potential for penetration and development

3. Why the Fintech Unicorns (instead of traditional big players)? Traditional big players lack innovation and entrepreneurship • Such as big banks and telecom companies • Largely state owned, lack motivation to change Technology learned from abroad, but duly localized • Combine finance with e-commerce and social networks New technology met with consumer needs • Good match between technology and people. • Technology matches with new life-style.

4. Implications to Financial Inclusion • Small size of financial products Accessible • Low minimum investment and credit amount Intention Result • Technology lowers Affordable •Not bottom-up •Facilitates financial cost per user financial inclusion inclusion approach • Technology speeds up the process of Convenient financial services reaching people

5. Where are we going? 5.1 Where are we going? • Deeply involved in all More aspects of life: housing, than travelling, eating out habit, education, finance medical services, • Fintech & traditional financial service Co- providers operation • Technology plus consumer relationship • Structural changes Strategic • Eg. less bank branches Shifts and staff in cities, more in villages

5. Where are we going? 5.1 Where are we going? Rural Household Mobiles Per Adult Distribution 400 120.00% 350 100.00% 100.00% 99.81% 99.25% 97.65% 92.39% 300 80.00% 250 74.34% 200 60.00% 51.32% 150 40.00% 100 20.00% 18.05% 50 2.63% 0 0.00% 0 0.25 0.5 0.75 1 1.25 1.5 1.75 2 Frequency CDF Data: CAFI Household Survey in Guangxi

5. Where are we going? 5.2 Bearing what challenges? Financial Balancing innovation with risks Stability Over-Indebtness Digital Unable to cover everyone Gap Be aware of illegal “ Wolf in investing/financing activities under the name of "financial sheep's inclusion" clothing" Consumer protection and education

6. Implications to other countries 3.Online -Offline 2. Scenario Driven 1. Infrastructure

6. Implications to other countries Embedded Scenarios Type 1: Through E-Commerce

6. Implications to other countries Embedded Scenarios Type 2: Through Social-Network

6. Implications to other countries Embedded Scenarios

5. 5.“1209 1209 ”项目的进展及规划 • 我们的计划 2017.4 • 2016.12.9 • 选择试验区 项目启动 THANK YOU! • 2017.8 开始项目 设计论证 • 2017.12 完成人员招聘、 • 2018.3 数据收集 发布第一次 DFI 监测报告