Chinese P2P Falls As Other Payment Ecosystems Expand

Thanks to a nationwide crackdown on peer-to-peer (P2P) lending in China, a move that came after a series of multibillion dollar scams in that space and resulting protests, the P2P industry there could see the number of players decline by as much as 70 percent in 2019. Chinese authorities are reportedly gearing up to shut down small and medium-sized P2P lending platforms across the country.

The P2P industry in China — which faced little regulation — launched about seven years ago and grew to 1.22 trillion yuan (nearly $180.4 million USD) by the end of 2017, according to Bloomberg. The fall promises to be almost as spectacular.

According to Yingcan Group, by the end of 2019, there will only be 300 P2P lenders remaining. During 2018, the market research firm said the number of P2P lenders declined by 50 percent to 1,021. What’s more, no new companies have entered the market since August.

The decline of the China P2P industry comes as that space continues to grow in the U.S., fueled in large part by Venmo and Zelle, and businesses working to offer such payments throughout retail, including restaurant payments.

Other Doors

However, so many other doors are opening as Chinese payments and commerce ecosystems expand.

Take WeChat, the wildly popular China-based message app, as a good example of that. In one of the most recent developments, Tencent, the developer of WeChat, said it wanted to offer a voice-activated digital assistant for the messaging app. It can almost go without saying that voice-assistant technology is among the hottest trends in retail and payments (evidence of that comes from such areas as connected cars and holiday shopping), and it provides a way to keep consumers tied to particular ecosystems, companies and payment methods.

The WeChat digital assistant goes by the moniker “Xiaowei” and will work with Tencent services, including its music streaming platform. It can also hail rides, among other tasks. The voice assistant market is still small in China, and if Xiaowei proves successful by getting out in front, WeChat could gain an edge on rival payment and commerce ecosystems that serve Chinese consumers both at home and abroad.

That is assuming, of course, that consumers take to voice-assistant technology. For now, at least, Alexa, Siri and similar voice activation technology is viewed as more of a novelty by Chinese consumers than something they would use on a daily basis.

Alipay Moves

WeChat’s competitors, of course, include Ant Financial’s Alipay, which has more than 700 million annual active users, with WeChat’s user base estimated at 1 billion or more. Alipay recently provided an example of how those China-based ecosystems are expanding abroad to serve the increasing number of Chinese consumers who travel internationally, including students.

In Sweden, Wirecard has teamed up with Cimple Marketing in an effort to bring Alipay to Venue Retail Group stores, according to reports. With the offering, Wirecard noted that the retailer “will become an attractive shopping destination for Chinese visitors.” The collaboration comes as 12.4 million people from China traveled to Europe last year, and that figure could rise to 20.8 million when 2022 rolls around.

Chinese consumers have taken to mobile wallets like few other consumers around the world. According to a recent report from Worldpay, 65 percent of eCommerce spend, and 36 percent of point-of-sale (POS) spend in the country, came from mobile wallets in 2017. Mobile commerce “is far outstripping traditional desktop purchasing in China, so you will want to offer local eWallet leaders Alipay and WeChat Pay,” the report said. “These eWallets and others are also a must at the point of sale, more so than in any major global market.”

The payments space in China also includes a company called PINTEC. As described in a PYMNTS interview with Karen Webster, the company allows banks, non-bank financial institutions (FIs) and businesses to turn on a host of services that, in essence, allow them to custom build their own consumer ecosystems. Some of the many specific solutions it provides is POS lending, wealth management, personal installment lending, small and medium-sized business (SMB) lending, insurance products and payment solutions.

Doors close all the time, but in China, that just means others are opening and getting wider.