FinTechs in China – with a special focus on peer to peer lending

Abstract

Purpose - China is a country with the most number of operating peer-to-peer (P2P) lending platforms (approximately 2,000) worldwide. This study aims to provide an overview on FinTechs in China. It was examined why payment services and P2P lending are so popular in China and what are the determinants for the emergence of P2P lending platforms in different provinces in China. Design/methodology/approach - This study conducted a descriptive analysis of P2P lending in China and an empirical analysis of determinants of P2P lending in China. Findings - This descriptive analysis shows that the surge in the number of the P2P platforms in China follows an inverted U-shaped phenomenon. However, the outstanding balances of P2P lenders is still increasing, while average yields of P2P lenders have sharply plunged. The empirical findings indicate that P2P lending is more extensive in the region with more mobile phone subscriptions; outstanding balance of P2P lenders in region is negatively associated with the size of traditional banking sector; and the number of the P2P platforms in negatively related to the fixed assets investments in region, whereas average yield is positively associated with the fixed assets investments. Originality/value - Currently, almost no research papers with empirical analysis of FinTechs, especially P2P lenders, exist. This study estimates a simple model to find determinants of P2P lending.