China Seen Sustaining Record Fintech Investments, Accenture Says

(Bloomberg) -- Chinese financial-technology investments this year may exceed 2016's record $10 billion as companies continue to raise funds for expansion and big banks grow their digital services, according to Accenture Plc.

The country's financial-services giants will probably ramp up investments in areas including artificial intelligence, blockchain, so-called big data and cyber-security to improve their product offerings, Albert Chan, managing director of China financial services at Accenture, said in an interview last week. More money will go into technology such as robo advisors, online lending and investment services, he said.

Last year's record investment in China -- pushed by a wave of “blockbuster deals” including $4.5 billion raised by Alibaba Group Holding Ltd.'s finance affiliate -- was more than three times the $2.97 billion logged in 2015, according to an Accenture statement that cited analysis of CB Insights data.

“The investment will continue to sustain at least at this level, if not more, for the year to come,” Chan said. “This year we are likely to see continued significant investment into fintech in China both from new market entrants and traditional financial institutions.”

The China investment drove Asia-Pacific fintech investments to $11.2 billion last year, surpassing North America for the first time, the Accenture analysis showed. North America attracted $9.2 billion, while Europe lured $2.4 billion.

The pipeline of potential investments in China this year is already looking promising: JD.com Inc. is spinning off its finance arm for 14.3 billion yuan ($2.1 billion), while peer-to-peer lender Lufax may also bring its long-awaited initial public offering to market. Lufax completed a $1.2 billion fundraising in January 2016 that valued the company at $18.5 billion.

Meanwhile, some banks are already exploring new technologies to fend off competition from tech upstarts. In the first half of 2016, more than 90 percent of banking transactions went through online channels at China's four largest banks, Bloomberg Intelligence analysts wrote in a Feb. 3 note. Industrial & Commercial Bank of China Ltd. and China Construction Bank Corp. have also set up online shopping malls, they said. Chan expects more such initiatives.

“The early success of the new entrants to the market inspires more traditional financial institutions to follow suit,” he said. “There will continue to be a capital influx in this area.”

--With assistance from Chanyaporn Chanjaroen

To contact the reporter on this story: Alfred Liu in Hong Kong at aliu226@bloomberg.net.

To contact the editors responsible for this story: Marcus Wright at mwright115@bloomberg.net, Darren Boey