Last night saw 150 of Melbourne’s leading fintech experts and founders gather in the York Butter Factory in Melbourne’s CBD to unearth solutions to one of FinTech’s most infallible challenges: how to gain access to business in China. Organised by Melbourne meetup Fintech Victoria, Gabriel Walker, Chief Digital Officer at LatiPay and Airwallex’s co-founder Jack Zhang answered the biggest questions surrounding Chinese fintech.
Fintech Victoria head Alan Tsen with Gabriel Walker and Jack Zhang
The two fintech startups, who both specialise in monetary exchange between Australia and China, have accessed China in contrasting ways. As Zhang noted, the Chinese market is not an easy beast to tame. Nonetheless, Airwallex now has the privilege of access to the RMB, a crucial license for exempting customers from the traditional capital controls imposed on Chinese businesses.
LatiPay, as Walker stated, has a more refined segment of the market in China, focussing on Chinese tourists abroad, by connecting Chinese payment methods with international merchants. Users of LatiPay are saved from the hassle of changing payment methods while travelling overseas.
Compliance, compliance, compliance
While there is no simple solution to cracking China, both parties found some continuity to accessing the market. Each representative emphasised the importance of compliance. Financial legislation in the country is highly complex and bureaucratic, and you have to jump through a lot of hoops before you can even begin to open business there.
“There’s a couple of ways to move money in and out of China, and none are simple. Each type of transaction has different compliance limitations on how much money can be transacted daily. Not only that, but there are different permits for the different industries: for example PayEco’s RMB license only permits transactions for education and e-commerce. You’ve got to really understand what you’re doing to fit into the criteria otherwise they’ll shut your bank account down. We take compliance as our number one priority and that’s how we can build a sustainable business and partner with a dozen banks around China to move money in and out without any issues.”
This is validated by the fact that Airwallex has a compliance team is seven people strong, of a team of 35.
Walker iterated that compliance was at the core of LatiPay’s company culture:
‘It’s not enough to be a fintech, you have to have a lot of regtech backing you.’
LatiPay understand the importance of compliance to much that they put each of their employees through monthly AML training.
A new ecosystem
One other key issue is understanding the new and different ecosystem of Chinese payments.
According to Walker, Chinese consumers go to Western stores online there is a 70% drop off rate, and that is largely due to the fact that the Chinese consumer is not used to Western payment methods.
Chinese fintech is in many ways highly advanced compared with the West. According to Zhang ‘payments are more instant.’ There are a hundred times more online payments made in China than in the UK.
Meanwhile, mobile is hugely important due to the takeover of AliPay and WeChat Pay and there is an ever-burgeoning market for it. Walker stated that 88% of China’s payment space is taken up by mobile.
Nonetheless, Walker noted that the difference in the ecosystem can create a lot of opportunity. He commented:
“There are 4 billion people that are used to using their services in a specific way, who you can acquire if you open up their access points when they go overseas.”
Moving with the competition currents
As Zhang stated, a few key players (Baidu, Alibaba and Tencent) have a monopoly on the market. But helping the big giants like TenPay and JD Pay rather than competing can be the ticket to success.
“Either work with them, get investment with them, or try to integrate within their ecosystem. Find out who your competitors are and try to work with them.’ Jack advised.
‘You don’t need to come up with a business model that works in the Western world and try to come up with a Chinese version of it.’ Walker added.
‘We shouldn’t try to compete commercially, we should leverage our own unique expertise.’
China’s ecosystem is vastly different, and compliance issues can pose a huge barrier. Yet, as these companies have discovered, with a dedication to addressing these challenges, access to such a vast, highly advanced fintech space can reap huge rewards.