China has leapfrogged the US and UK as the undisputed global fintech hub, according to a collaborative report produced by DBS and EY entitled “The Rise of FinTech in China.”

“The speed, sophistication and scale of development of China’s fintech ecosystem have been at a level unmatched in more established markets. As banks and financial services institutions in the West look at ways to incrementally innovate, China’s technology leaders are revolutionizing many aspects of financial services,” according to the report. 

Currently, 40% of Chinese consumers use new payment methods compared with 4% in Singapore, while, 35% use fintech to access insurance products compared with 1%–2% in many Southeast Asian markets. There are also significantly higher rates of fintech participation in wealth management and lending.

As of the end of 2015, mobile online payment users reached 358 million, 64.5% up year-on-year. At that point, China’s utilisation ratio of mobile online payments stood at 57.7%, with more than 1-in-2 persons using their smartphone to conduct financial transactions primarily through Alibaba’s Alipay or WeChat’s payment service.

In 2016, mobile banking values have continued to rise exponentially, with 6.3 billion mobile payment transactions conducted in the second quarter of this year, spending RMB29.3 trillion (US$4.4 trillion).

“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,” says Neal Cross, DBS Chief Innovation Officer.

Leading fintech players such as Alipay have developed as a response to a gap in the market for direct and trustworthy e-payment channels. Ant Financial, Alibaba Group’s financial affiliate which operates Alipay, have expanded into investment products, lending, credit scoring, insurance and so on.

“Chinese fintech products are also often highly intuitive and convenient. Platforms and apps are becoming indispensable — aiding in the digital adoption process. China’s unique mix of rapid urbanization, massive and underserved market, e-commerce growth, explosion in online and mobile phone penetration, and customer adoption have created a fertile ground for innovation in commerce, banking and financial services,” says James Lloyd, EY Asia-Pacific fintech leader.