China constricts homegrown fintechs through new legislation
Chinese homegrown fintech companies are bracing themselves following news of tighter regulations to limit their activities in the communist nation-state.
Currently, an estimated 87% of China's $29tn domestic financial market, is made up of fintech consumers.
The move to further regulate the industry follows Ant Group’s IPO suspension late last year. With more than 730 million monthly users on its digital payments service Alipay, Ant Group is China's biggest payments provider.
Speculative reports suggest the CCP became nervous of the investment power and size of Ant Group, and its high-profile founder, Jack Ma, who controls 8.8% of the fintech.
They also say Beijing has been on a campaign to neutralise risks in the country’s $53tn financial system since early 2017. Executives who become too wealthy, powerful and outspoken are also on the CCP’s watchlist.
Last year, Ant Group, which is a third owned by e-commerce giant Alibaba, led China’s online lending industry, by issuing $324bn between June and November. The fintech’s IPO was then unexpectedly suspended on November 3rd, two days before a $37bn initial public offering. Ma was also summoned to speak with regulators.
New Fintech regulations
However, supporters of the move say officials are simply trying to establish a balance between fintech innovation and regulation in China. The swift growth of fintech in China has resulted in regulatory authorities having to consider the potential risks it poses to the financial system.
Ant Group’s public $35bn offering was the largest in history. The Shanghai Stock Exchange reported at the time, that “major issues regarding changes in the fintech regulatory environment might cause the company not to meet the listing conditions or disclosure requirements.”
A tightening up of rules will inevitably impact on smaller fintech operatives.
According to the East Asia Forum, the regulatory changes for homegrown fintechs proposed by the China Banking and Insurance Regulatory Commission include tighter rules on loan issuing. Proposals say internet platforms need to fund a minimum of 30% of co-lending partnership loans.
Ant Group's funding policy fell heavily short of that mark. The fintech's main role in the co-lending process was as an IT provider, with most funding was put up by partner banks.
Experts also speculate that this may result in online microlending companies (MLCs) establishing or maintaining partnerships with banks to sustain their businesses because of the capital requirements of the new regulations.
A recent report by the Washington-based international law firm Akin Gump Strauss Hauer & Feld LLP states, “China’s regulators have been concerned for some time about the systemic risks to the Chinese economy posed by online MLCs and the enormous amount of leverage made easily available by those lenders and their partners. A number of the consumer loan Fintech players put up only 1% of the loan amount, whilst collecting substantial loan referral fees from the bank lenders who make most of the loan amounts available.”
It adds that some of the new regulations will result in better management of China’s domestic Fintech industry.
“Some believe that the proposed regulations are long overdue – there has been increasing pressure on regulators to take a proactive stance with respect to the regulation of MLCs, especially given that a number of MLCs have undergone significant growth and their local regulators are not equipped to adequately deal with what have become (in some cases) systemically-important enterprises.”
Upgrade launch new credit card with bitcoin rewards
Upgrade, a fintech company focused on providing credit for mainstream consumers, has launched the Upgrade Bitcoin Rewards Card a new version of its Upgrade Card featuring bitcoin rewards. Under the new programme, users earn unlimited 1.5% bitcoin rewards on every purchase as they make payments.
The custody and trading platform for holding and selling bitcoin is provided by NYDIG and the card is a Visa Signature card, which includes benefits such as trip and baggage insurance, purchase protection, and extended warranty coverage.
The company offers credit lines from $500 to $25,000 with the Upgrade Bitcoin Rewards Card depending on your credit score. It works with Apple Pay and Google Pay. Like other Upgrade credit cards, there are no monthly fees, late fees, or returned payment fees.
"Upgrade Card is already delivering over $3 billion in annualised credit to consumers," said Renaud Laplanche, co-founder and CEO at Upgrade. "Starting today, anyone can apply for an Upgrade Bitcoin Rewards Card and enjoy the same affordable and responsible credit as with any Upgrade Card, plus the potential upside and fun of owning bitcoin."
Participating in the crypto economy
Upgrade isn’t the first company to announce a credit card with bitcoin rewards, but it’s the first one that is generally available. Anyone can apply with no waitlist, and start using their virtual card immediately until they get their physical card in the mail.
"Crypto rewards introduce cardholders to a new asset class that is increasingly part of a consumer's financial portfolio," said Terry Angelos, SVP and Global Head of Fintech at Visa. "Whether you're a crypto enthusiast or just getting started, programmes like the Upgrade Bitcoin Rewards Card offer an engaging and low-risk way to participate in the crypto economy."
At the moment, you can’t do much with your bitcoins. You can choose to hold them or sell them. There’s no way to transfer your bitcoins to another wallet for instance. If you choose to sell your rewards, there’s a 1.5% transaction fee.
This card is not currently available in all 50 states. Customers in Hawaii, Indiana, Iowa, Louisiana, Nebraska, Nevada, New Hampshire, North Carolina, Washington, West Virginia, Wisconsin, and the District of Columbia can’t order an Upgrade Bitcoin Rewards Card at the moment.