China has for long held the title as the top funder for fintech startups in Asia. However, in recent month, another Asian powerhouse India has emerged as the top funder for fintech companies in the continent.
According to a report by CB Insights, fintech startups funding shrank by 87.6% year-over-year to $192.1 million in the Q1 of 2019. Despite that fact, India gave out $285.6 million funding to fintech startup during that period; overtaking Chinese’s funding to the sector.
Perhaps the plunge in Chinese investment into the sector can be attributed to a tightened regulation on online lending in the country. A measure the country has been working on introducing over the past few years, as the authorities and regulators seek to rein in on financial risks from the fledging online lending industry.
The government has particularly been cracking the whip on peer-to-peer lending, whereby an individual goes online looking for a loan and is matched by another individual looking to lend with interest.
Though that arrangement offered a credit line to the unbanked population in China who would otherwise not get loans from the traditional money lending institutions. However, the online lending industry has since been marred by rampant fraudulent activities across the board.
When the Chinese regulators introduced new regulations, thousands of peer-to-peer lending websites were shut down. Leaving as few as 300 sites just operational. That is according to Yingcai, the Shanghai-based research firm.
Just like China, India burgeoning fintech industry is riding on the wave of lack of adequate financial infrastructure leaving many unbanked. Thus providing the environment for burgeoning lending startups online to cater to the unbanked and underbanked consumers and enterprises.