It’s no secret that China is at the forefront of digitization. But the reasons why — and what’s behind the country’s innovative approaches to product development and customer acquisition — provide useful lessons for the rest of the world.
During the recent Sir Gordon Wu Distinguished Speaker Forum at the Columbia Club in New York, George Tan, CEO of MetLife China, identified several factors behind China’s digital dominance:
- Mobile connectivity shows no sign of slowing. Tan noted that 86 percent of the China population has smart phones, versus 63 percent in the United States.
- China is the world’s biggest e-commerce market, buying $454 billion in goods in 2014, compared with $306 billion in the United States.
- Unlike competitors from many other regions of the world, Chinese companies tend to cross sector lines, looking to serve customers in various ways. Tan pointed to WeChat, whose one app lets users do everything from shopping for notary services and oil changes to providing cashless payments at restaurants. “It combines Facebook, Google, Amazon, and PayPal,” he said.
- Another big difference is the path fledgling Chinese companies follow. Compared with many Western companies, which must satisfy investors by recording profitability along the way, the Chinese model is to “get to scale first and worry about making money later,” said Tan.
The digital area that is among the fastest-growing in the country is financial technology, or “fintech.” Services such as online payments, wealth management, lending, and insurance tend to start with entrepreneurs, leaving traditional industry leaders such a banks playing catch-up.
“[Traditional] financial services companies have enough resources for the VIP in China, but not enough for the general customer,” Tan explained. Unburdened by physical infrastructure and able to tap into digital data feeds to already-loyal customers, Internet players such as Alibaba can lend small sums, provide, wealth management advice, and increasing pair peers who want to lend and borrow.
Internet companies are also innovating all kinds of products that are new not just to China but to the industries they compete with. For example, in Tan’s field, insurance, recent offerings from digital providers include refund delivery insurance, passenger liability insurance, food security insurance, and gynecology health insurance.
All this innovation begs the question: What laid the groundwork that has let Chinese fintech companies become so creative? Tan suggested four factors:
- An open, supportive regulatory environment (which he compared with the high-barrier atmosphere in the United States)
- A business model in which new products are launched through established distribution channels
- Enormous consumer demands for inclusive finance that traditional players have not met
- A trail-and-error mentality in which eventual rewards justify risks.
Tan believes innovation will lead to even more digital integration into people’s lives. The Chinese trend is toward one-stop shopping. “People watch TV, shop, eat, and purchase travel and health items, all though one provider,” he said. “They want to use a single source to do everything that pertains to key life events, including babies, school, marriage, house purchases and maintenance, retirement, and end-of-life care.”
China’s digital powerhouses have every intention of meeting these demands — and creating new ones — throughout customers’ life times, said Tan.