Rising domestic consumption and a fintech boom are expected to drive an expansion in China’s consumer finance market to over 12 trillion yuan (approx. $1.74 trillion) by the end of the decade.
A new report issued by the Chinese government indicates that China’s consumer finance market is already approaching 6 trillion yuan, and is expected to expand 20% over the several years.
On the back of this breakneck growth the “China Consumer Finance Innovation Report” released by the National Institution for Finance and Development expects consumer loans to exceed 12 trillion yuan by 2020.
According to the report a boom in online financial products and fintech are play a key role in unleashing latent consumption across China.
Qu Li, the general manager for the consumer finance affairs department of JD Finance, said that the breakneck growth of online consumer finance is expanding the supply of finance in the consumer space, and could resolve the dilemma of financial access for average citizens.
Qu points to automation as the key to raising the efficiency of consumer finance operations.
“Irrespective of whether it’s traditional financial institutions, online financial institutions or fintech companies, the key to resolving financial access lies in resolving the problem of sustainable costs, which means resolving the problems of cost and efficiency,” said Qu.
“For example not one of our ‘IOU’ operations are processed by humans, but all employ machines for decision-making, which reduces the cost for each transaction to nearly zero.
“Our back room systems can process several tens of thousands of transactions in a single second, which would be inconceivable for previous financial service models.”
NIFD’s report also warns of the increased risk associated with the spread of online financing and fintech.
It points to big data as the foundation for controlling online financial risk, and advocates the conversion of traditional risk control models into new model that uses big data analysis for the automation of decision making.