The FinTech scene is dynamic and continuously developing. For years, there has been a lot of focus on the US market. But lately there’s growing awareness of the importance of developments in China. We sat down to talk with Heidi Berg, a Partner at Nordic Venture Capital firm nHack who lives in China immersed in the developments and tasked with taking advantage of opportunities in the Chinese market.
PA: Why did you decide to move to China?
Berg: For several years, I worked with Telenor Financial Services on innovation in Asia. In my work there, I could see first-hand the enormous influence and impact China would have on future developments. I found it exciting and it also made me curious, so to really understand it, I decided to move there.
PA: Why should Nordic players in the financial services industry look to China?
Berg: Well, to stay ahead, you always need to strive to learn from cutting edge developments. And in my view, you can really get a lot of inspiration and learning from the Chinese market. An important reason for this is that the whole ecosystem is different. And since the ecosystem is different, there are also a number of unique solutions that you cannot find anywhere else. In addition to the learning, there may also be interesting opportunities for partnerships.
PA: Why has China moved to the forefront of FinTech?
Berg: China came from a unique starting point with low consumption and few digital services. At the outset, China did not have a well-developed financial infrastructure. However, the government built other types of infrastructures, like mobile networks and roads, and were positive about the use of new technology. The rapid availability of internet, smartphones and increased spending power created the perfect storm. People wanted to shop, but could only do it online, so they had to adapt mobile payments. Players like Alibaba, WeChat and others emerged.
The government’s approach to regulation, along Deng Xiaoping’s "Crossing the river by feeling the stones" approach, has also been important. Letting tech players develop services quite freely before regulation is developed has enabled rapid testing of new products and services.
PA: The stereotypical impression some people have is that Chinese companies are fast-followers rather than firstmovers when it comes to innovation. What have been the key drivers for creating a culture of change and innovation?
Berg: The Chinese people are hungry for development, hardworking, knowledge-driven and do not see boundaries, only opportunities. That said, I would say the new tech companies are the ones spearheading innovation primarily. They have a completely different culture compared to the traditional Chinese businesses, including banks. People I have spoken to that have moved from new tech companies, like Ant Financial, to more traditional Chinese companies say that is a greater cultural shock than moving from China to working abroad.
The leadership in the new tech companies is very young. I met with a number of senior managers in one of the Chinese tech giants recently - they were all around 30 years old. They have studied ways of working in Silicon Valley and speeded it up further. So, you could say they are not changing a culture, they are building their own.
PA: What do you see as the most innovative characteristics of FinTech in China?
Berg: In my view, the most innovative characteristics of FinTech in China are the integration of social media dimensions into solutions and the seamless integration of services. WeChat Pay’s digital ‘red envelopes’ is the classic example. Giving family and friends small gifts in red envelopes for good luck is a centuries-old tradition, deeply rooted in Chinese culture. WeChat introduced the ability to do this within their app, a feature that helped them drive a massive increase in new users.
PA: What about technologies like blockchain and artificial intelligence?
Berg: These are also areas of substantial interest and development. Even though cryptocurrencies have been banned, important investments are being undertaken in blockchain-based solutions, particularly in the public sector. Guangdong is one example where they are using blockchain-based systems for registering invoices for tax exemptions to combat fraud. Extensive use of AI is also important. Last week I met with JD.com, who are developing facial recognition for pigs so they can offer pig insurance down to the individual - and make sure there is no fraud.
PA: What do you recommend Nordic businesses do?
Berg: I think the first thing to do is simply start paying attention to what is going on in China. The Nordic press so far has had limited coverage of what is going on, so you have to go find the good sources yourself. The sheer scale of the market and innovation power of players like Alibaba, Tencent and a number of others expanding in the global market means you can’t ignore these forces.
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