A collaborative report from DBS and EY has highlighted China’s unique, dynamic and rapidly evolving FinTech ecosystem, while examining the key drivers behind the explosive growth of FinTech sector in the country.

The report, titled “The Rise of FinTech in China”, was released in November 2016. The authors see huge potential in China and believe that in the coming years, it could dominate the global FinTech industry with a very strong domestic market.

“The speed at which China’s FinTech landscape has developed is truly remarkable. It’s gotten this far because China’s landscape has operated in a sandbox-like environment conducive for FinTech to thrive — a strong domestic market, coupled with a constant push for innovation and experimentation driven by leading giants, unhindered by international influence. Much of this can be attributed to the favorable government policies and regulations”, Neal Cross, DBS Chief Innovation Officer, said.

According to the report, Chinese FinTech activity spans seven key vertical markets, which includes payments and e-wallets, supply chain and consumer finance, peer-to-peer (P2P) lending platforms, online funds, online insurance, personal finance management, and online brokerage.

The authors further said that China’s financial services sector is ripe for disintermediation, buoyed by several factors such as exponential growth in digital connectivity; deep penetration of smartphones; unmet financial needs; the explosion of e-commerce and a core of restless internet giants.

The report also takes note of various blockchain initiatives in the country, which it says, have largely been associated with academia and research institutes. The Chinese market saw a flurry of developments by mid-2016, with the formation of consortiums including China Ledger Alliance, Financial Blockchain Shenzhen Consortium, and Qianhai International Blockchain Ecosphere Alliance.

“These blockchain forays are still at the nascent stages in China, with some proof-of-concept efforts under way but wider adoption and implementation remaining a long-term play. As with blockchain developments elsewhere, pain points in current platforms are impeding adoption. Challenges include: difficulties in integrating with current ecosystems; lack of security protection for application data, logic and operating environment; and issues around trust and protection of individuals’ and business’ privacy”, it said.

It further said that Chinese fintech firms are penetrating new product markets overseas to diversify revenue streams and reduce their home-ground reliance. As these firms expand out of China, it remains to be seen whether they will prove robust enough for international markets, it said.

“While the country hasn’t received the attention and acclaim of its counterparts in the FinTech arena, its champions are blowing away competition all over the world. It’s only recently that we are starting to see China’s leading FinTech companies take center stage at the global level. This will be an ongoing trend in the coming years and we can expect China’s FinTech ecosystem to have a wide-ranging impact on global FinTech development”, Cross added.