Dianrong will work on several projects that tackle areas of particular importance for the Chinese economy:
- A fintech cloud platform. Dianrong will help the Development Bureau create a cloud platform to allow small businesses, including small lenders, in the city to deploy fintech solutions more easily. These will include fraud detection, risk management, and compliance reporting tools. The platform will also enable regulators to more closely monitor local lending companies, allowing them to issue timelier "policy guidance." This emphasis on fraud detection and governance among small lenders is likely tied to ongoing government concern about, and crackdowns on, China's micro and alt lending sectors.
- An internet finance development fund. The fintech will collaborate with the DFIIG to set up a dedicated investment fund for local financial companies. Specifically, the fund will focus on "fintech projects and startups with the potential to strengthen Dalian's new economy." This focus on supporting companies that can help modernize the city's financial system suggests that, despite China's sometimes harsh attitude toward the fintech industry, its expertise is becoming an increasingly indispensable resource for ensuring the Chinese economy is at the forefront of innovation, especially as Chinese output moves increasingly away from manufacturing to services.
- A supply chain trading platform. Dianrong will also design and build a blockchain technology-based supply chain finance platform for the city to help local small suppliers with their cash flow management. The company already has expertise in this area, as it successfully built and launched a blockchain-based supply chain finance platform with a Foxconn subsidiary in March. At the time, Dianrong claimed that the unwieldy number of parties and large scale involved in supply chain finance operations have resulted in the majority of mainland China's 40 million small-and-medium sized businesses (SMBs) being underserved, something it says immutable ledgers could help streamline, boosting local economies.
China seems to be taking the lead on a major global fintech trend. In BI Intelligence's recent Fintech Ecosystem report, we argued that fintech globally is now on the cusp of integrating into the financial services system proper, but that it would be some time before this happens.
One caveat to this statement may be China, where this is already occurring. Dianrong is only the latest example: Ant Financial signed a memorandum of understanding (MoU) with Standard Chartered in December to participate in China’s Belt and Road initiative, and Tencent is advising the government on a universal credit scoring system. However, as mentioned in the report, fintechs will need to survive a full credit cycle and downturn akin to the 2008 crisis for this integration to be successful.
Chinese fintechs, like their counterparts elsewhere, have not yet gone through this crucible, so it remains to be seen whether their speedier integration is happening prematurely.
Fintech hubs — cities where startups, talent, and funding congregate — are proliferating globally in tandem with ongoing disruption in financial services.
These hubs are all vying to become established fintech centers in their own right, and want to contribute to the broader financial services ecosystem of the future. Their success depends on a variety of factors, including access to funding and talent, as well as the approach of relevant regulators
Dianrong, one of China's leading fintechs, has struck a partnership with two finance industry bodies in the Chinese city of Dalian, the Dalian Finance Development Bureau and the Dalian Finance Industry Investment Group