President of Chinese financial investment platform Phoenix Finance believes the nation’s FinTech companies pose “a very big risk.” Vince Zhang spoke at CNBC‘s East Tech West conference in China, saying that many of the country’s tens of thousands of FinTech firms don’t have the controls needed to make them safe investments for both consumers and the nation’s economy.
“A lot of companies are not [there] in terms of their business plan, in terms of their risk management process, in terms of their overall management,” he said. “A lot of these corporate control mechanisms are not in place.”
China has recently seen a surge in companies using financial technology (FinTech) to attract the country’s millions of previously unbanked consumers. However, while the technology is fine, the financial services (FinServ) offerings concern Zhang.
“Without proper risk control mechanism personnel, without proper ways of communicating with regulation, it’s potentially becoming a very big risk going forward,” he said. “I would predict in 2019, it’s becoming more regulated. There will be less and less players in this field.”
Zhang is certainly not the first executive to share concerns. Earlier this year, BlackRock Co-Founder Robert Kapito warned that the increase in Chinese tech companies offering financial services could leave existing Western firms struggling to compete.
“This is a story that I do not think ends very well,” Kapito said at an event in Switzerland back in April. “Apple was not in the music industry, Google was not in the mobile phone industry and Amazon was not in the groceries business — until they were. Tech companies are going to enter the financial services market in a very, very aggressive way.”
Despite any concerns, global nations are looking to make their mark in FinTech. With that in mind, regulators from around the world have been working together to create a blueprint for a global FinTech “sandbox.”