China Innovations (and other hacks!)#1 : Finance Tech in China

10 years ago I got my first bank account in China. No problems. Fill out a couple of forms, sign a few papers and deposit a few RMB and away we go. As we were nearing the final stages of the process at the bank branch, I was expecting to see some details on my login and website details where I could do my online banking. After asking the question and a bit of scurry, the bank manager handed me a USB dongle. Hmmm I wondered what is this for?  Many many many minutes later I realized that online banking was pretty much nonexistent in China. This dongle was to be used as an encryption key when accessing my account online but only to view account details, no transactions were possible.  I also realized that banking in China was the equivalent of taking a couple of hours out your day to stand in line and push lots of paper, signatures, approvals and stamps around.  Doing anything in the archaic Chinese banking system was the equivalent of walking in molasses or really thick Canadian Maple Syrup.

Fast forward to today and China boasts over 2500 internet and App companies exploring crowdfunding. Compare that to the 150 that are based in the USA.  Finance Technology (fintech) in China is leapfrogging the western world’s traditional online banking infrastructure and coming up a whole new paradigm in mobile banking that can be arguably be the most innovative on the planet. Like African countries that never had traditional phone infrastructure and are adopting mobile phones first, starting from a clean slate without the burden of existing online banking infrastructure has many advantages in experimenting with innovations faster on the mobile platform.  Here is a sampling of some of these small innovations in the China fintech industry:

  1. A typical keyboard on a smart phone has the QWERTY format. To combat some of the issues around login security, China Construction Bank’s app has a randomized configuration of the keyboard characters. Why? So the swipe pattern of the password is never replicated the same way. If anybody is looking at your typing they wont be able to figure out your password which could be important if you are a “one password” type of gal.
  2. Wechat Pay and Alipay are the two leading mobile app platforms in China now competing for the mobile banking mindshare of the Chinese consumer. Wechat Pay has a fascinating way to interweave the very specific Chinese culture with features that resonate with the China consumer. The “Red Packet” feature is a great way to feel good about yourself by distributing small amounts money to people in your chat circle. Talk about response rate when one of these packets get sent out!
  3. M09 is a China internet company solving the credit card issuing process which has typically existed in the USA. People in China that don’t have credit cards don’t want to provide the normal credit card information to the bank. MO9 just asks for their mobile phone number and instantly approves microcredit.

Now I wouldn’t do justice to the China banking system if I didn’t comment on the clever ways that the traditional banks (like China Construction Bank) are fighting back.  Now, I could still put out my dongle and do a lot more than I did 10 years ago online with my Bank Account but there are fees associated with it.  But do this on my China Construction Bank app and there are ZERO fees and NO dongle. A good way to incentivize everybody to start adopting the App.  Kudos to that!

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