Are China’s tech giants a threat to European banks?

Paris: China’s Ant group may have suffered a setback due to the IPO suspension, but European banks remain concerned that Chinese tech giants may soon become their main competitors.

In recent years, the European financial sector has seen the emergence of a large number of startups – called fintech – that have sought to disrupt traditional banks by providing digital services.

While it hasn’t really threatened existing banks, it has been forced by fintech companies to shed their operations and invest heavily in providing similar digital services.

“It is likely that the real competitor of tomorrow is GAFAM or the ants of the world who have the ability to invest large sums,” said Frederic Odia, president of Société Générale France, recently, using a French acronym for Google, Apple, Facebook, Amazon and Microsoft.

US tech giants are making more bridgeheads in financial services in a region where their Chinese competitors are already doing well.

From chatting to super app

Ant Group, which had hoped to raise $ 34 billion through an initial public offering before the Chinese government pulled the rug from under the process, is the owner of Alipay, the payment platform that is now an inevitable component of daily life in China.

Its main competitor in China is WeChat Pay, which is owned by internet giant Tencent.

“Companies that originally developed chatbots have a strong interest in promoting these activities as they enable them to cover a wider range of individuals’ daily activities,” said Christopher Schmitz, a fintech expert at Ernst & Young.

“Gradually, an ever-increasing share of individual spending goes to these companies,” he added.

The Chinese have widely adopted payment by flashing QR codes to sellers on their smartphones using Alipay or WeChat Pay due to their convenience.

Alipay alone has 731 million monthly users.

In just a few years, these two platforms have transformed China from a country where cash was king to a society where smartphones are the preferred method of payment.

These companies are not just providing payments. They provide more financial services, including the ability to get a loan in just several clicks.

“Alipay generates a greater return from the financial services it provides, such as investment plans and loans, compared to the payments themselves, which are really just the tip of the iceberg which has become a great app” said Adrien Boue, a consultant at Alipay.

“The goal is for users to stay in the app for as long as possible. From morning to evening, there is always a job: talking with friends, ordering a taxi, ordering food, and even working on collaborative projects,” he said.

Cultural barriers

“The most advanced model in the financial sector He said back.

The question is just to what extent this model can be reproduced in Europe, especially after the setback for the initial public offering of the Ant Group, which some observers see as a move by the Chinese authorities to bring a very ambitious company to the heels.

“Our banks are still a bit protected,” said Julian Maldonato, financial services expert at consulting firm Deloitte France. “There are still cultural barriers, but they will not protect us forever.”

One of those cultural barriers is QR codes.

“In Europe, payments based on QR codes are not very common,” said Ernst & Young’s Schmitz.

The fragmented nature of Europe with its different languages ​​and cultures also makes it difficult for an outsider.

But Maldonato noted that American technology companies are already very much present in the daily lives of Europeans, and Chinese TikTok has attracted young users who are the “bank customers of tomorrow.”

It is the ability of Chinese companies to pour money into developing new technologies and acquiring customers All of them plan to invest about $ 70 billion USD over the next five years It can really change the game.

“This worries Americans who will speed up” their investment as well, Maldonato said, while European companies will struggle to exit even by a few billion.

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