Banking & Finance

Chinese adoption of online wealth management products second only to US, says report by Boston Consulting and Lufax

Tech-savvy consumers, rapid growth in internet financing platforms and the ‘go smart’ trend among financial institutions behind growth

PUBLISHED : Wednesday, 16 May, 2018, 7:02am
UPDATED : Wednesday, 16 May, 2018, 7:02am

More than a third of wealth management products sold in mainland China in 2017 were retailed online, according to a report released on Tuesday by consultancy major The Boston Consulting Group and internet finance company Lufax Holdings.

According to the report, 34.6 per cent of such products sold in China were taken up online – second only to the United States, where this figure stood at 40.7 per cent. The US also maintained its position as the world’s largest wealth management market, at US$9.4 trillion, followed by China at US$6.2 trillion.

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“China is well placed in terms of online wealth management usage, thanks to tech-savvy consumers, a rapid growth in internet financing platforms and the ‘go smart’ trend among traditional financial institutions,” David He, partner and managing director at BCG, said in Shanghai on Tuesday.

Financial institutions are embracing and adopting new technology at a “surprisingly” fast pace, according to the report. For instance, it is estimated that the Chinese banking industry invests about 100 billion yuan (US$16 billion) in new financial technology each year, leading the world, He said.

Looking ahead, the digitalisation trend is projected to maintain this momentum. The ubiquitous use of mobile payments, driven by years of network development and marketing by technology majors such as Tencent Holdings and Alibaba Group Holding, has laid a sound foundation for the growth of digital wealth management, according to the report. Alibaba owns the South China Morning Post.

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Mainland China is already home to 717 million smartphone owners as the world’s largest market. It also claims to have more than 500 million online payment users, or 68 per cent of its total internet population.

And according to Greg Gibb, co-chair and chief executive of Lufax, the use of artificial intelligence and big data is expected to reshape the industry. For instance, new technology can help investors become more familiar with equity investments thanks to easier access to wealth advisory, shifting their focus on fixed return products, he said.

Sun Jun, assistant general manager at the treasury department of Shanghai Pudong Development Bank, meanwhile, said that as quickly as in two years, robots could replace “a huge number” of human advisers, and offer smart, standardised wealth management services in a more cost effect way.

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China, however, lags far behind the US in terms of the popularity of independent internet finance platforms because of its early stage of development. In the US, the world’s largest economy, such platforms account for about 36 per cent of the total market. The level in mainland China still lingers at about 10 per cent.