China has made substantial progress in promoting financial inclusion over the past 15 years. Traditional financial service providers have significantly expanded the physical coverage of their financial service network, which includes the establishment of the world’s largest agent-banking model (referred to as the model of rural cash withdrawal service stations in China). Meanwhile, China has emerged as a global fintech leader. Technology-driven service providers are changing the ways of payment, lending, saving, insurance, and investment behaviors of Chinese customers.
Account ownership ratio in China, a basic metric of financial inclusion, has risen significantly to the current level in par with that of other G-20 countries.
The report, jointly drafted by the People’s Bank of China (PBC) and World Bank Group (WBG), summarizes China’s approach to and models of financial inclusion development over the past 15 years. It compares the evolution of financial inclusion in China with that in other similar economies, and elaborates on critical progress and key drivers. The report also highlights challenges ahead for China as well as its experiences and lessons for policy makers in other countries.
In recent years, the theory and practice of financial inclusion in China has undergone significant transformation. Since the early 2000s, expanding access to basic banking services has been one of the policy priorities, with measures including enhancing credit information and payment system infrastructure, expanding the physical network of service outlets for rural customers, and supporting the establishment of new financial service providers.
In 2015, China published the Plan for Advancing the Development of Financial Inclusion (2016–2020) (“FIP”), signaling that financial inclusion in China was developing in a more coordinated pattern.
Financial regulators in China also leave some room for the development of innovative digital finance. The fintech industry in China continues its rapid growth providing various digital financial products and services for millions of underserved financial consumers. Through network-based online business model, the fintech providers are able to integrate financial services into existing e-commerce and social media platforms.
The continued growth of fintech in China also prompts traditional financial service providers to explore further into digitally-driven business models.
The report notes that China still faces some key challenges in achieving long-term, sustainable financial inclusion, which calls for shifting the growth model toward a more market-oriented and commercially sustainable approach.
Policymakers of China shall make further improvements on its regulatory framework and instruments to address potential risks in digital finance. As many consumers have rather limited knowledge about digital technologies and finance and digital finance may add to data-related risks, greater attention shall be attached to financial consumer protection to help solve such problems.
Chinese experiences can be helpful to financial regulators in other countries who are also committed to exploring and improving long-term, sustainable financial inclusion. For example, from the perspective of governments, policy-driven initiatives including giving priority to developing financial infrastructure and reaching the last mile of financial networking are all important experiences to draw from; from the perspective of market, the network-based online business model is a key to the success of fintech in China, as it leverages on network effects, technology, economies of scale, big data and cross-subsidization opportunities.
The financial inclusion achievements in China over the recent years and its future development path are highly correlated with the WBG’s target to achieve Universal Financial Access (UFA) by 2020. The UFA goal is that, by 2020, all adults globally have access to transaction accounts to store and transfer money. China is among the 25 priority countries in the initiative.
