How to Achieve Success as a FinTech StartUp in China

China FinTech Shanghai Breakfast Session April 2016

China’s financial industry is one of the biggest financial sectors in the world, and FinTech has the potential to completely disrupt the industry. However, there are a myriad of challenges for StartUps in China. In the China FinTech Shanghai Breakfast Session on April 19th, co-organized by mediaman, KapronAsia, China FinTech and XNode, professor David Lee from Singapore Management University, and Rui Ding, VP from shared their insights on the growing needs of FinTech StartUps and industry trends in China.

The first topic was the status quo of FinTech in China, so Rui mentioned the confusion surrounding the term “FinTech”, or internet banking in general. Even the main stream media and people working in the industry can be a bit unclear on what “FinTech” means or covers. In an article about a private equity firm that recently went bust, a media outlet titled their coverage “Warning signs for the FinTech industry”, despite P2P Lending only representing a small part of the whole industry.

When asked about how to achieve success as a FinTech StartUp, Rui suggested 4 areas for strategy and product development.

1. Data is king. But more importantly, you need to be able to properly analyze and utilize the data itself for financial products.

2. Focus on a niche market will help a startup go further.

3. Adopt a mature business model. P2P startups can look for B2B cooperation to acquire more individual customers.

4. Use algorithms and big data to create personalized financial services to differentiate as banks’ services are not great at the moment due to cost and internal mindset.

Data is king, but relying on the raw data is far from enough. Digging, analyzing, and predicting customer behavior are the areas with potential to create significant value for FinTech companies. The birth and popularization of Yu’EBao was a milestone for China’s FinTech. The financial products started to value long term customers and designed business models with smaller investment thresholds which profited from and helped these clients. Meanwhile, VCs continue to show passion investing in FinTech StartUps.

Next there was a discussion on some of the challenges FinTech StartUps are facing. The foundation of FinTech is finance, which is the core of China’s national security which is why FinTech is closely supervised by the government. Compliance with the law is a requirement and is a key element of FinTech innovation. Industry talent also plays a key role in determining your success and attracting talent is not always easy. The cooperation between engineers and financial professionals is very important. It is ideal to find talent with knowledge of both technical and financial backgrounds, which is difficult in the industry. FinTech StartUps need to pay equal attention to two important areas: on one hand, they must keep improving risk models and attract investors with relatively safe assets to promote products that are inclusive. On the other, they need to gather data to attract larger groups of borrowers while still pushing younger generations to use more credit, and in a more responsible manner. One way of doing this is introducing them to installment plans for travel and education, so they can explore the world and grow as people. Making good use of consumer lending products for personal development has a strong potential for growth.

Rui from also gave some insight onto how VCs judge FinTech StartUps. Firstly the communication skills with the government financial regulatory departments is crucial. FinTech startups must be able to understand and execute policies and laws correctly. Secondly, proper combination of risk models. Last but not the least, the INNOVATION of FinTech products.