In this report published by KPMG in January 2024, EasyTransfer was listed as a Leading Enterprise, earning the accolade for the second consecutive year. As a leading financial technology ("fintech") firm focused on cross-border payment services for international students, EasyTransfer has become a key player in the paytech segment. The 2023 report outlined ongoing trends in the fintech industry and examined the future of fintech within the wider Chinese economy. One of the notable themes of the report is AI, primarily Large Language Models (LLMs). AI has begun a more widespread introduction into fintech, and the report outlines a vision for how artificial intelligences could be revolutionary. The concept of "fintech" itself, in 2023 has been revitalised and it is being given greater status and priority than ever.
A key and pivotal event in the development of fintech in China for 2023 was the Central Financial Work Conference, which was held in 2023, for the first time in six years. Policy makers proposed to “accelerate the construction of a financial power” and offered a clear blueprint for the development of the sector. Digital technology and digital transformations are also an ever-present theme that should be developed as it is a vital driver of growth and development, with the ability to grow not only the fintech space itself but also provide multipliers elsewhere in the economy.
Research and Development is thriving in 2023. The report highlighted that "72 percent of selected companies had over 40 percent technical personnel," showing the prioritisation of technological advancement and innovation across the sector. In a dynamic and relatively infant industry such as fintech, a high number of technical personnel are required to introduce and implement new technologies. Encouragingly, the research and feedback from the companies listed reflects this.
Fierce market competition exists; statistically proven by the appropriately strong investment into R&D within the space enabling technological breakthroughs and the ability to gain market share for incumbents and new entrants alike. There remains a healthy, competitive dynamic within the space as in 2023, 22 percent of firms were established for more than 10 years, a 4-percentage point rise on the previous year. In spite of this, new firms are still able to enter the market as opportunities for start-ups still exist.
Large Language Models (LLMs) signal the start of a new dawn for technology, they are the most significant advancement in this year’s report, reflected by the depth in which KPMG go in to. The introduction of this technology will change the way firms operate, from their knowledge acquisition processes, customer services and HR departments. It is inevitable that fintech will become highly integrated with LLMs, and they will improve productivity, not only of the workforce, but equally, technology. There are few areas in which LLMs are likely to be particularly applicable. For example, Risk Management. This is due to the capacity of LLMs to use Deep Learning to understand and analyse “complex risk patterns over longer cycles”. Analysing and deconstructing patterns over a long period, is an important element of Risk Management, and LLMs are superior at this in comparison to traditional financial models, which are held back by a lack of ability to continually iterate and therefore identify risk.
However, the financial sector tends to be highly regulated, and it is likely that as the LLM technologies develop, they will be regulated and controlled. LLMs are dictated by the data they are provided. For financial firms to derive value from LLMs, data must be of high quality, and it must be supported by basic processes such as data cleansing, standardisation and quality verification. Otherwise, the implementation of AI technologies such as LLMs will see their benefits mitigated, due to the absence of the necessary framework that is a requisite for them to operate. Furthermore, the fintech industry needs to understand exactly how they wish to use LLMs and other types of AI in the future, to yield benefits from its existence.
Artificial Intelligence Generated Content (AIGC) is key to the development of China’s future economy – digitalisation and advanced technology will elevate China from middle income to high income status, embracing technologies like AIGC is vital in this process. AIGC will open the door to new market opportunities and enhance the opportunities in the current market itself. It will make decision making in sectors such as insurance more accurate, and potentially improve pricing strategies, by making them progressively more accurate. The use of AI will also be of value in areas such as marketing and advertising. AIGC will be a major part of this as it can generate unique and creative content, but when partnered with LLMs there will be an ability to engage in human–computer co-operation to an extent we have not previously seen. It is likely to help firms understand and target their customer base and market themselves more effectively.
Fintech has a key role in growing the economy and the presence of the industry across China provides multiplier effects of significant magnitude. This is due to the multidimensional potential of data, and the use of multi-source data in fintech and the economy. This is because it can be used in science, technology, energy, taxation and other fields that provide genuine value in terms of economic output. These investments, if they harness data effectively, can create goods and services that exceed their initial investment values, hence providing a positive multiplier effect, potentially yielding growth for the economy.
Cross-border payment technologies are going to be a vital part of the expansion of China’s economy, and it will be significant in the push towards the "Going Global" initiative. The technologies of cross border payments will assist SMEs and micro enterprises to branch out into the Belt and Road. This is because they have the capability to hedge risk and provide credible and secure cross-border payments. This is going to be of growing importance in coming years due to the geopolitical outlook with the EU and USA, which looks increasingly hostile and defensive against Chinese enterprise. China’s export market is evolving and the fintech sector must adapt in accordance with this, as trade is likely to shift from away the EU and USA and toward the countries involved with the Belt and Road Initiative.
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