MAF202 Money and Capital
MAF202 Money and Capital
Assessment Task 1 Group Assignment
GROUP REPORT CHINA
GROUP MEMBERS: IZNA KHAN (221281022),
HARRISON ANGUS MEERS (s222379896), ELMIRA ZEQAJ (s222360368).
INTRODUCTION
This report has the objective of displaying knowledge regarding specific aspects of the financial system and regulatory body. This report will show information regarding the Fintech Industry in the Asia-Pacific region mostly targeting China. The current state of the fintech industry within China as well as a critical assessment of growth of the industry during the COVID-19 pandemic and what risks arise with this growth. The Neobank Webank will be focused on to use as a prime example of how Neobanks function, what products they offer, how they source funds, how they are different from traditional banks and what this could mean for loans and lending approaches. Finally, a there will be a brief review of the 2021-22 ASIC annual report including a comparison to 2020-21 period because ASIC is the Australian Securities and investments commission.
TASK 1.
China has become a global leader in the fintech sector thanks to its large population and booming economy. The country's thriving fintech industry has changed traditional financial system functions and transformed financial services thanks to technological improvements and consumer demand. The largest and one of the most vibrant fintech markets worldwide is found in China. With a population of more than 1.4 billion, China offers fintech businesses a sizable market (Briefing, 2022). The adoption of smartphones and the use of the internet in the nation are both extremely high, which is helping fintech services develop.
Ant Group, the financial division of Alibaba, is one of the major players in the Chinese fintech market. Alipay, a mobile payment system from Ant Group, has transformed how individuals deal in China (Concepcion, 2019). With millions of active users making seamless digital payments using their phones, Alipay has a sizable user base. Alipay has changed the payment landscape, making cashless transactions the norm in many areas of China thanks to its simplicity, effectiveness, and security. (Concepcion, 2019). Tencent's WeChat Pay is a key player in the Chinese fintech business. WeChat Pay, which is a feature of the well-known social media site WeChat, provides a variety of financial services besides just payments, such as wealth management and online banking (Liao, 2023). WeChat Pay's status as a top fintech provider in China has been cemented by its integration with the social media platform, which has given customers a seamless and practical banking experience.
The Fintech sector in China is divided into several different categories in addition to payment services. Peer-to-peer (P2P) lending services have gained popularity and now offer financing to both individuals and small enterprises (Putri et al., 2023). Lufax and CreditEase are two businesses that have emerged as major players in the P2P lending market by using technology to speed up loan origination and risk assessment procedures (Loh, 2023). China has seen a boom in the development of digital wealth management platforms that give people access to investment possibilities and individualised financial guidance. Companies like JD Finance and Tianhong Asset Management have used technology to expand access to investing services, enabling customers to manage their portfolios and choose which investments to make using user-friendly applications (Sheng & Mo, 2019). A substantial amount of progress has also been made in insurance technology (Insurtech) in China's fintech sector. By utilising digital platforms and data analytics to provide customised insurance solutions and enhanced consumer experiences, Insurtech startups like ZhongAn Online and Waterdrop have challenged the traditional insurance industry (Chakraborty, 2022).
Government laws and regulations that are favourable have helped the fintech industry develop in China. Recognising the revolutionary potential of fintech in fostering economic growth and enhancing financial accessibility, the Chinese government has actively pushed for digitalisation and financial inclusion (Hasan et al., 2020). To promote innovation, regulatory sandboxes have been set up, giving fintech companies a regulated environment in which to test and improve their products. Looking ahead, the fintech sector in China still has considerable growth potential. Fintech firms are positioned to play a critical role in enhancing access to financial services as the Chinese government pushes for digitalisation and financial inclusion (Cag, 2021). Furthermore, the development of technologies like blockchain, AI, and cloud computing will promote innovation and open up new business opportunities for fintech in China (Chakraborty, 2022).
The Fintech sector in China has expanded and changed dramatically overall. China has emerged as a leader in global fintech innovation thanks to its sizable population, high rate of digital adoption, and supporting government policies. The fintech market in China is constantly changing, revolutionising how people and businesses access and handle financial services thanks to major players like Ant Group and Tencent driving technology breakthroughs.
Task 2.
The Chinese fintech sector expanded quickly during the COVID-19 outbreak. The necessity for contactless transactions and digital financial services was boosted by the health crisis, which drove fintech solution adoption (How Global Fintech Charted a Positive Course During COVID-19, n.d.). Due to consumers' desire to reduce the risk of virus transmission through physical currency transactions, mobile payment services have seen an increase in popularity. While offering many benefits, the fintech sector's rapid expansion in China also carries some concerns. Data breaches and privacy violations are among the main causes of concern (Mani, 2019). The massive volumes of personal and financial data that fintech companies collect raise questions about data security and unauthorised access. Past data breaches have brought attention to the necessity of strong cybersecurity safeguards and stringent regulatory supervision (Mani, 2019).
China has implemented regulatory measures to ensure the safe and secure operation of the fintech sector to address these threats (Gongsheng, 2021). To protect consumer data and privacy, the Chinese government has passed several laws and regulations about data protection, including the Cybersecurity Law and the Personal Information Protection Law (Marley, 2023). To avoid data breaches and unauthorised access, fintech companies must adhere to these standards and put strong data protection procedures in place (Gongsheng, 2021). Furthermore, regulatory bodies have developed frameworks and recommendations for risk management in the fintech industry. To reduce risks connected to credit quality, investor protection, and asset management, businesses engaged in P2P lending and digital wealth management must abide by particular rules. While safeguarding the interests of investors and consumers, these regulations seek to establish a stable and open environment for fintech operations (Briefing, 2022). Additionally, regulatory sandboxes have been put in place in China to promote innovation in the fintech sector and properly manage risks. These sandboxes, which offer a controlled environment for testing innovative goods and services, are open to fintech enterprises. This enables authorities to keep a close eye on and evaluate any hazards connected to cutting-edge fintech solutions before they are widely implemented (Kapronasia, 2020).
Despite regulatory measures, dangers and obstacles remain in the Chinese fintech market. The possibility of financial instability and systemic vulnerabilities is one such danger (Chen et al., 2022). Certain fintech categories, including P2P lending, have experienced rapid market expansion and growth, raising questions about loan quality and potential defaults. The necessity of strong risk management and regulatory monitoring has been highlighted by instances of fraud and misconduct in the sector. Continuous oversight and monitoring of the fintech sector are necessary to manage these concerns. To recognise and reduce possible dangers, regulatory agencies must work closely with fintech businesses. Regular audits and assessments can help ensure regulatory compliance and reveal any problem areas that call for corrective action (Chen et al., 2022). In the fintech sector, consumer protection is another important issue that needs to be addressed. It is crucial to inform customers about the risks and potential problems associated with digital financial services as fintech services become more integrated into people's lives. To protect consumer interests and foster consumer trust in the fintech sector, clear disclosure of terms and conditions, transparent pricing schemes, and efficient complaint resolution mechanisms are essential (Chen et al., 2022).
In conclusion, the COVID-19 pandemic's impact on China's finance industry has created both opportunities and risks. Fintech has given consumers practical and creative answers, but there are now worries about data security, privacy, and financial hazards. The Chinese government has implemented data protection legislation, risk management standards, and regulatory sandboxes as regulatory measures to address these issues. To guarantee the sustainable and responsible expansion of the fintech business in China, however, continued surveillance, cooperation between authorities and fintech companies, and consumer education are required.
Task 3.
One of Chinas largest neo-banks, WeBank, is a digital bank that launched upon receiving its banking licence in Decermber of 2014 in Shenzhen, China. Founded by Tencent, Baiyeyuan, Liye Group, and other companies WeBank offers financial banking services such as loans, credit card facilities and online banking. WeBanks mission statement indicates the digital bank strives to provide more convenient financial services to micro-, small- and medium-sized enterprises (MSMEs) and the general public (A World-leading Digital Bank, n.d). This differentiates them from competitors as their target is to provide financial inclusivity through affordable, accessible, appropriate and sustainable (The Most Advanced Digital Bank, 2022), banking services for underserved individuals and small businesses increasing their consumer spread by catering to more of the population. An unsecured consumption loan called Weilidai, was WeBanks first loan product offered through WeChat and QQs wallets via AI technology. This digital bank differentiates itself from its competitors through its time efficient services by providing loans to borrowers within minutes via modern technologies including microservices, cloud, open-source databases, open technologies, powerful embedded analytics, and AI. Another point of difference is its low cost as on average the cost of operating a WeBank account is $0.50 USD annually to administer compared to traditional banks which have up to 10 times the operating fee.
WeBanks uses other traditional banks to source funds such as making small loans from traditional banks which include Hua Xia Bank Co. and The Bank of East Asia Ltd to then loan its customers funds in an instant. Also by offering loans such as Weilidai, through WeChat and QQ wallets which respectively have over 1.7bilion and 650 million active monthly users allowing WeBank to gain customers through offering loan through these high popular applications (The Worlds leading Digital Bank, 2019). Also, by launching its own application in 2015 WeBank offers investments, deposit, and wealth management services which help source funds, for further lending. WeBank is a digital only bank which in comparison to traditional banks only operates online and does not have any branches that consumers can visit for financial banking services. This allows the digital bank to have lower bank fees due to low operating cost in comparison to traditional banks.
Traditional banks can take up to thirty plus days to approve loans whereas, WeBank can approve loans within minutes through financial analysis AI technology. There are over 140 million SMEs and unserved individuals that due to low credit ratings or low-income earners that contributes to over 60% of Chinas GDP thus, WeBank solves borrowing capacity for such a group through their fast and efficient lending services, (Financing SMEs and Entrepreneurs, 2023). Furthermore, WebBank being a digital only bank contributes to their environmental and social responsibility by implementing paperless, energy saving banking, as well as financial inclusion contributing to sustainable banking. This concept of branchless banking was highly driven by the impact of COVID-19 and has led to a drastic growth in online banking and the growth of neo-banks within the fintech industry (Putra Brahma Andira, n.d). Therefore, encourages easy online lending with simple verification processes, allowed digital banks to enter the market and cease this change to improve and innovate consumer banking through online financial services.
Digital banking makes it easy for customers to access their finances on the go as well as saving travel time due to their branchless nature making them digitally accessible whilst being convenient. WeBank being a digital bank means it customers can access their accounts 24/7 despite their location. Overall, WeBank has had a major impact on Chinas population through its technologically driven financial services creating an influx of users to use online banking as their preferred method of banking.
Task 4.
ASIC is the Australian Securities & Investments Commission, ASICs role is to enforce and regulate laws regarding financial and company services to protect Australian investors, creditors, and consumers from foul play. Each year ASIC releases an annual report that highlights their performance by revealing key data points such as criminal convictions and the details of said convictions. Each year ASIC performs key actions such as the commencement of legal proceedings against companies and individuals regarding alleged breaches of the Corporations Act as well as other laws. ASIC also Issues notices of infringement and penalties to companies and individuals who are found to be in breach of financial services and credit laws. A relatively new action taken by ASIC is the investigations into cryptocurrency providers to ensure they are working within regulation. ASICs main objective is to maintain market integrity and protect consumers. Across 2021-2022 (Annual Report 2021 -22, n.d.) ASIC performed over 1,040 surveillances, finding 61 cases of instances that had potentially misleading or deceptive promotional material, and 18 interim/final stop orders. In terms of enforcement, there were 107 new investigations commenced with 37 criminal litigations completed with 89% of those criminal litigations successfully completed. The criminal outcomes of ASICs performance resulted in a total of $2.1 Million in fines and $102,175 in pecuniary penalties. Regarding Civil outcomes, there was a total of $229.9 Million from civil penalties. An interesting point made by ASIC was that the COVID-19 pandemic caused considerable challenges for ASIC such as delays in investigations and court proceedings.
The 2020-2021 ASIC annual report has similar statistics to the 2020-22 report although by analysing the data from each report, it is evident that 2020-2021 was a more successful year for ASIC in terms of outcomes. This could be attributed to the COVID-19 Pandemic which was causing more problems in 2020-2021 than it has been recently, especially with the conclusion of job keeper on March 28, 2021. In the 2020-21 report, ASIC conducted over 1,080 surveillances compared to the 1,040 in 2021-22, although they conducted more surveillances, there was 59 instances of potentially misleading material being withdrawn of amended compared to the 61 in the most recent report. In pervious reports there was 110 investigations commenced with 29 criminal litigations having been completed with a 100% success rate with criminal litigations. The most recent report completed 8 more litigations than the previous. Compared to the $2.1 Million in fines that was recorded in 2021-22, 2020-21 only recorded $151,100 in fines but had a total reparation order value of $1.8 Million whilst the most recent report did not report any reparation order value. 2020-21 completed 46 civil litigations with a success rate of 93% whilst the 2021-22 report completed 61 civil litigations with a success rate of 100%. The outcome of civil penalties was found to be $189.4 million in 2020-21 which is $40.5 million less then what was reported in the most recent year. In 2020-21 there was 224 prosecutions for strict liability offences making up for a total value of fines and costs of $669,906 whilst in 2021-22 there was 181 prosecutions for strict liability offences but there was a total value of $1,019,106. That is an impressive $349,200 more that was recorded in the 2020-21 report. From looking at all these statistics it is evident that ASIC was active in responding toward the COVID-19 Pandemic largely because the COVID-19 pandemic dominated much of ASICS activity during the period of 2020-21. ASIC showed a continued focus from the 2020-21 period into the 2021-22 period by improving upon their governance in the financial services industries and taking action against multiple companies and individuals for breaches against regulation and business conduct.
Conclusion
The objective of the report was achieved through a detailed analysis of Chinas financial system and regulatory body. The ongoing growth of Chinas fintech industry is due to its current state, as a global leader and highly technologically driven population. Ant Group responsible for the mobile payment system Alipay and online retailer Alibaba has easily transformed the financial market through its digital payment transaction system alongside, Tencents WeChat Pay a similar financial services platform. The impact of the COVID-19 pandemic on Chinas financial market has had both positive and negative effects, whilst creating a dual effect of opportunities and risk. Ones online data security being a major risk factor creates a sense of fear for consumers online banking having the potential of being hacked, privacy being leaked along many more risks online in the report. However, on combat such risks Chinas regulatory body and legation has had many changes and improvements to protect consumers and manage the potential digital risks which arose do to the shift of online banking after the COVID-19 pandemic. The most dominated neobank in China, WeBank has changed the game for Chinas financial sector through its quick and easy lending services for SMEs and the unserved allowing small businesses to borrow without having to go through the lengthy loan process traditional banks offer. This has allowed China to integrate an environmentally friendly and sustainable finically service through paperless, digital only banks whilst supporting the welfare of small enterprises. COVID-19s impact on financial markets has been critically important as ASIC displayed an ongoing effort from 2020-21 period into 2021-22 through improving their governance within the finical industry by taking corrective action against many companies and individuals for legislative breaches and business conduct. Overall, these financial assets, markets and institutions have had an astronomical impact on Chinas economy creating a booming push within Chinas digitally driven fintech industry
References
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In-text Citation: (Financing SMEs and Entrepreneurs, 2023)
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In-text Citation: (Putra Brahma Andira, n.d)
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In-text Citation: (The Worlds leading Digital Bank, 2019)
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In-text Citation: (A World-leading Digital Bank, n.d)
