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China has written the book on mobile payments. Where else would you see people going days without pulling a single note from their wallet? As a result, China's third party mobile payments market is huge. Last year, it was worth 8.8 trillion dollars. By comparison, for us, it puts the size of the US market at a mere 112 billion dollars. This partly reflects the absence of legacy payments, like cheque books or credit cards, and the arrival of a generation weened straight onto mobile phones.
Two of China's biggest and most powerful companies dominate the market, Alibaba and Tencent, both tech companies valued in excess of $400 billion, are now battling it out. This battle has taken them beyond payments, into financial services such as loans, credit scoring, and wealth management. Indeed, Alibaba runs the world's biggest money market fund, Yue Bao, which translates as leftover treasure.
Tencent, which rapidly narrowed the gap with first mover Alibaba on payments, is now honing in on wealth management, offering funds through one of the country's biggest mutual fund managers. In September, it went a step further, acquiring a 5% stake in CICC, China's first privately owned investment bank. But China's two tech giants aren't just dominating the fintech space and collecting a tonne of valuable data in the process, they're also disrupting it.
These fintech players have won over smaller companies and consumers, leaving large state owned enterprises to the big banks. But as SOEs looked like less attractive clients, banks are starting to chafe, prompting regulators to start taking steps, tiny ones so far, to even out the playing field.