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Regional Development of China’s Inclusive Finance Through Financial Technology:

Regional Development of China’s Inclusive Finance Through Financial Technology: Financial technology, commonly used the term as FinTech, is a key emerging driver of inclusive finance. This is also one of the emerging issues of finance as well as financial research. This research is done with the purpose of showing the present status of China’s FinTech in inclusive finance development. In addition, the study raises regional disparity and critical issues related to the inclusive development. A secondary data analysis methods are systematically carried out to demonstrate the present situation of internet finance in the development of inclusive finance in China, as well as the developing status of different provinces through internet finance. The ultimate finding of this research is that, despite significant development in China’s financial system, there is still a development inequality between the most and least developed regions. This study also identifies some important issues that should be taken care of by the policy makers. This research is done from authentic data also sources with appropriate explanations, which help the readers, academicians, researchers, and others to get comprehensive understanding of China’s FinTech and its influence on inclusive development. Keywords internet finance, FinTech, inclusive finance, financial inclusion, Chinese economy, mobile payment, inclusive development Partnership for Financial Inclusion (GPFI), are helping to Introduction develop the inclusive finance in different ways. In this pros- It is important to reduce the financial crisis, improve the pect, internet finance is regarded to be one of the most influ- financial equity, reduce financial exclusion, and build a sus- ential tools in the development of inclusive finance. In a few tainable inclusive finance to develop the economy of a coun- years, China’s inclusive finance has changed rapidly and they try (Gomber et al., 2018a; Salampasis & Mention, 2018; are regarded as to be the global FinTech leader of the world. Zhou et al., 2018). It is also essential to reduce the economic Even though the revolutionary change started since 2004, the disparity between the rich and the poor. In this context, inclu- massive development occurred after 2013. By developing the sive finance plays crucial roles in stimulating economic rural economy, it is growing day by day. It also contributes to expansion. All core financial forces need be developed to the sustainability and strength of China’s economy. achieve the sustainability of the financial system. This means Economic development is well linked to inclusive finance that both rural finance and urban finance need to be devel- (Long, 2016; Mitra & Das, 2018; Zhou et al., 2015, 2018), oped on an equal footing (Anagnostopoulos, 2018; Ding and inclusive finance is deeply connected to inclusive et al., 2018). In addition to the development of the urban growth (Siddik & Kabiraj, 2020). Therefore, inclusive economy, a well-developed inclusive finance is one of the growth plays important roles in developing the economy. most critical issues in balancing economic and financial More specifically, China’s inclusive finance is one of the development (Fan, 2018; Zhou et al., 2018). Also, the devel- oped inclusive finance can increase gross domestic product School of Finance, Nanjing Audit University, China (GDP) and maximize the country’s long-term social welfare Xuzhou Medical University, Xuzhou, China (Hao, 2017). However, the development of inclusive finance School of Management, University of Science and Technology of China, has come with different success factors that differ from coun- Hefei, China try to country, and is seen as a broader factor in national and Corresponding Author: global development. That is why different international orga- Lu Yajuan, Xuzhou Medical University, Xuzhou 221002, China and School nizations, including the World Bank Group (WBG), the of Finance, Nanjing Audit University, Nanjing 211815, China. Email: luyajuan66@126.com Alliance for Financial Inclusion (AFI), and the Global Creative Commons CC BY: This article is distributed under the terms of the Creative Commons Attribution 4.0 License (https://creativecommons.org/licenses/by/4.0/) which permits any use, reproduction and distribution of the work without further permission provided the original work is attributed as specified on the SAGE and Open Access pages (https://us.sagepub.com/en-us/nam/open-access-at-sage). 2 SAGE Open most prominent examples in the last two decades. China’s of past studies, the shortcomings or challenges of these stud- rapid growth of FinTech significantly influences its devel- ies, and future research directions. opment of inclusive finance. All over the countryside, peo- ple use Fintech, which creates massive opportunity to Method financial access to rural people. It has been working as strong helping hand as their inclusive development. Easy We conducted this research based on some studies conducted access of financial products and services makes the rural life by Guo et al. (2016), Huang et al. (2016), J. Wang et al. much easier than the earlier days. People from countryside (2016), Long (2016), Lee and Shin (2018), and Xie et al. easily start their business, develop family business, small- (2016). Also, a number of studies related to inclusive finance and medium-sized enterprises (SMEs), and involve in rural and FinTech have been analyzed as based on articles such as investment. These lead China’s inclusive finance toward a research done by Zhou et al. (2018) and Tam and Hanh stable rural development. As the economic development and (2018). Whatever, internet finance is associated with financial inclusion are directly related, most of the studies the existing financial institution in China, such as banks, are focused on the individual factors of financial inclusion. insurance, securities, and investments companies, and pro- Few studies have addressed the FinTech or internet finance vides innovative financial solutions (Hung & Luo, 2016; context in the development of inclusive finance; specifi- Thompson, 2017). In this prospect, different phenomena, cally, emphasizing the inclusive development through changing effects, and the relationship among the technolo- FinTech is very rare. Even a small number of researches gies to explore the influence of internet finance on inclusive illustrated the inclusive developing status of all provinces of finance are analyzed here from different perspectives (Cukier China. Researchers have found this research gap. After et al., 2009). A systematic literature review analysis is fol- exploring the research gap and the literature of FinTech ele- lowed to accomplish the goal of this study. ments on both the development of inclusive finance and the rural development, the subsequent stages of the develop- Data Collection and Content Analysis ment of China’s inclusive finance and rural development through FinTech are presented in this research. The view of Database for FinTech or internet finance is not as rich as different authors, researcher, fellows, and others has been other financial topics, and inclusive finance database is not gathered and considered here to accomplish the research so widespread. That is why the data used in this article is objectives. This research aims to provide an essential dis- collected from variety of sources using multiple methods cussion from the understanding of FinTech and inclusive (D. H. Shin & Park, 2017). When using content analysis, finance. However, after studying the related literature of this most articles were collected from secondary sources (Hasan research, specific objectives are specified. The objectives et al., 2018; Hasan & Mahmud, 2017a, 2017b; Nekmahmud are to identify the present circumstances of related forces of & Rahman, 2018; D. H. Shin & Park, 2017). This study FinTech in inclusive finance (Objective 1), to illustrate the mostly based on finding out the critical phenomenon of dispersion of regional inclusive development of all prov- FinTech and inclusive finance with an interpretative inces through FinTech (Objective 2), and to identify the approach from the secondary data (Majedul Huq et al., critical issues existing in the development of inclusive 2016; Zavolokina et al., 2016). Many research articles, finance through FinTech (Objective 3). review articles, case studies, and conference paper have All the three objectives are accomplished here sequen- identified and collected from secondary sources. Following tially. The discussion on Objective 1 is presented in the sec- the research done by Hasan et al. (2019), data were collected tion “Present Status of FinTech and Inclusive Finance.” The in a systematic process. At first, the two best-indexed data- second objective is set out in the section “Developing Status bases Scopus® by Elsevier B.V and Web of Science Core™ by Region.” Finally, the third objective is introduced in both were selected to maintain the quality of the collected arti- the finding sections with a remark of Critical Issue. In total, cles. After that, we emphasized the search options of some eight critical issues are identified in these studies. reputed journal publishers such as Elsevier, Emerald, Springer, Taylor & Francis, Wiley, Sage, and so forth. These publishers usually publish most of the prominent journals of Literature Review business, finance, and economics. Also, data were collected Most previous studies have focused on internet finance, from Google Scholar and ResearchGate, which are the plat- FinTech, and inclusive finance. Most of the researchers high- forms of the researchers and academician to collect the light the online payment systems as one of the most influen- related research articles. Different studies based on FinTech, tial forces of inclusive development. China’s online shopping internet finance, digital finance, inclusive finance, rural marketplace is also remarkable part of their rural develop- finance, and financial inclusion are centralized here. In ment. Based on these studies, Table 1 shows a comprehen- addition, some articles were collected from the World Bank sive overview of the literature. This overview includes the database, which is regarded as one of the best databases for content of this study, the author’s information, the findings financial inclusion research. Whatever, all variables are 3 Table 1. A Comprehensive Overview of the Key Aspects of This Research. Content Authors Findings Shortcomings/challenges Future research direction Financial technology Ashta & Biot-Paquerot (2018); Chiu •• FinTech has five technologies such as security •• The challenges within the financial •• Data-Driven FinTech (2017); Davis et al. (2017); Gabor and privacy, hardware and infrastructure, data services sector are market Framework (DF2) has & Brooks (2017); Gai et al. (2018); technology, applications and management, and participants, global interoperability, proposed to facilitate and Gomber et al. (2018a); Greenspan service models consolidation activity, collaboration standardize future FinTech (2000); Huang et al. (2016); G. •• The exploration of FinTech interactions is related to models, technological development, researches as well as Li et al. (2017); Long (2016); social and political context and tech-company disruptions technical deployments Puschmann (2017); Salampasis •• The successful development of China’s FinTech •• After 2015, almost 1,263 P2P failing •• A comparison should be & Mention (2018); Shim & Shin industry is directly related to its technological platforms closed, and every 3 P2P made in the future of (2016); G-24 (2018) development and the policies of the Chinese companies became a problem Chinese FinTech industries government platform to other countries. •• There are some reasons behind the growth of •• The entry barriers of P2P company •• Sustainability of inclusive FinTech: cheap communication (mobile, internet), in the market are low because they financial systems will be big data analysis allows efficient targeting, people just need to register as ordinary explored are comfortable with online money, bank staff lose commercial enterprises. In this case, •• Each part of digital finance interest in being locked inside a megabank, low- they have no strict restrictions business functions should interest rate, and banking regulation side-stepped on the business scope, ratio of be explored in future •• Digitization of the financial services industry, registered capital, risk monitoring, research changing role of IT, and changing consumer behavior evaluation capacity, and so on •• What will be the •• Online payment boosted Chinese online shopping. •• Sometimes FinTech service performance, and the side It motives to increase GDP and maximize China’s companies face different difficulties effects of digital finance social welfare in meeting the demand for a large under diverse market number of customers situations in the entire •• Financial transparency for all sector has •• Lack of information usages limit economic cycle? developed the risk warning functions and the •• The justifications and •• Branches and ATM both are still lower than Brazil evaluation of the credit reporting variability (e.g., accessible (another country moving with financial inclusion) system financial service, •• Some encouraging factors of mobile payment are •• Sometimes it faces problems in profitability, funding socioeconomic conditions, cost efficiency, diffusion efficient operations costs, effectively and of mobile phones, convenience, new initiatives, and •• Financial exclusion is the major prudently, and commercial so on problem sustainability) of different •• Requirements for mobile payment project •• Inclusive finance research in all over business related to digital deployment: usability and simplicity, universality, China is still not developed; even finance will be explored interoperability, cost and speed, integrality, security, there is a lack of comprehensive •• The relationship between trust, and privacy, local market understanding, and representation of those researches. digital finance or FinTech cross-border payments •• Massive numbers of people are and systemic risks shall be •• Digital finance business functions include digital excluded in accessing financial explored financing, investment, digital currency, payment, services in all form of the •• “First-mover advantages,” insurance, financial advice, and so on economy—macro, micro, and meso financial safety, and •• Even if the internet influences the systems of •• Some challenges are heavy stability shall be explored organizations and financial transactions, the basic regulations and restrictions, limited functions of financial activities remain unchanged collaboration, underdeveloped •• The IoT is currently emerging as the next megatrend ecosystem, security problems, and in technology, with repercussions across the so on spectrum of society and business •• In some area, the crowdfunding •• Competitive internet markets and high-quality still is in the initial stage of its infrastructure have removed different challenges development with the appearance of convergence services; changes are beginning to occur •• Advanced technology is drastically revolutionizing industry and society and is becoming an integral part of everyday life (continued) 4 Table 1. (continued) Content Authors Findings Shortcomings/challenges Future research direction Inclusive finance/financial Aggarwal (2014); Chakravarty & Pal inclusion (2013); Gabor & Brooks (2017); Hao (2017); Helms (2006); Huang et al. (2016); Patwardhan (2017); Sharma et al. (2013) Rural development/ Ding et al. (2018); Long (2016); S. microfinance in China Wang & Richter (2009) Online/mobile banking/ Chen et al. (2017); Iman (2018); Jun online payment & Yeo (2016); Thompson (2017); Yoon & Jun (2018) Internet finance/digital Boyes & Stone (2003); Claessens finance et al. (2002); Gomber et al. (2017); Guo et al. (2016); Helms (2006); Huang et al. (2016); Hung & Luo (2001); Khraisha & Arthur (2018); Shen & Huang (2016); J. Wang et al. (2016); Wonglimpiyarat (2018); Xie et al. (2016); Gomber et al. (2018a); Gomber et al. (2018b); Gomber et al. (2017) FinTech and others Anagnostopoulos (2018); Buchak et al. (2017); Cumming & Schwienbacher (2018); Fan (2018); Gimpel et al. (2018); Gomber et al. (2018a); Gozman et al. (2018); Hornuf & Haddad (2016); Hung & Luo (2016); Jagtiani & Lemieux (2018); Jakšič & Marinč (2018); Lee & Shin (2018); Leong et al. (2017); Y. Li et al. (2017); Ma & Liu (2017); Nakashima (2018); Ohdoi (2018); Shim & Shin (2016); D. H. Shin (2016b, 2016a); D. D. Shin (2019); D. H. Shin & Lee (2017); D. H. Shin & Park (2017); Todorof (2018); Zavolokina et al. (2016) Note. IT = information technology; GDP = gross domestic product; IoT = Internet of Things. Hasan and Yajuan 5 selected by relating to internet finance, FinTech, and inclu- quotations are quoted to make the readers understand better. sive finance. Here, the working population and nonworking Here, we have used content analysis, infographic presenta- population, and constant population and moving population tion (Lankow et al., 2012; Siricharoen & Siricharoen, 2015; have characterized as parts of the population. From this Smiciklas, 2012), and exploratory research method to aspect, we have just considered the population by citizen- achieve the goal of this study (Stoeckli et al., 2018; ship. For instance, total population by province to province is Zavolokina et al., 2016). The relationships between the data selected according to the citizenship criteria. are presented in different infographic tools, such as graphs, charts, and tables (Siricharoen & Siricharoen, 2015). Data Analysis and Interpretation Research Framework This study shows the developing status of inclusive finance development through internet finance. According to the A systematic research process is followed here. The concept China Internet Network Information Center (CNNIC), of a research framework is taken from Hasan et al. (2019) to almost 97% of people who use internet use internet on their finish this article. A systematic presentation of the entire mobile phone. That is why smartphones and the internet are research process for the study is presented in Figure 1. the two most important variables for the development of inclusive finance through internet finance, and here we Theoretical Framework related internet use with the developing status. However, Table 2 shows ranking and percentile calculation to show Inclusive finance is directly related to the accessibility of the state of developing of all provinces based on internet financial services that comprise a wide range of financial finance assumptions. To show a more accurate result, the products and services accessible to low-income and unbanked APU percentage calculation method is used here (in this people, mainly living in rural area. Also, it means that all the case, A for Area, P for Population, and U for User). This adults should have access to appropriate financial product method is used here because the areas of all provinces are and services. Typically, this process starts with opening a not the same. bank account or a financial transaction account (Demirguc- If we count only internet user, Shanghai stands first rather Kunt et al., 2017). In most cases, traditional financial prod- than Beijing, because the number of internet users in ucts and services overlook rural people because of their Shanghai is bigger than in Beijing. However, Beijing is meager income. That is why the innovative and updated standing here as first because the ranking is calculated con- financial services are working to provide better access oppor- sidering not only the users but also the area and total popula- tunity to those financially excluded people. It helps them to tion of the respective provinces. Therefore, inaccurate save money, support their business and families, hedge ranking may arise only by user ranking. However, the per- against every day’s risks, and promote their financial activi- centage calculated by the APU method shows that the per- ties. These new and innovative financial services fully centage in Beijing is higher than that of Shanghai. In this undergo through the technological innovations. These tech- sense, the percentage of per km2 internet user from per km2 nological innovations play very important roles in providing population is calculated here to show a more accurate devel- better financial access to rural people. These services are oping status. The APU formula is given below: referred as FinTech, which is very popular in the present times as the financial market, and its rapid development is an Internet User emerging issue of the finance world (Casanova et al., 2018; TotalAreakm () Area −− PopulationUser APU unit = ×100 () T TotalPopulation Gai et al., 2018; Gimpel et al., 2018). It is the combined form TotalAreakm () of “Finance” and “Technology” (Zavolokina et al., 2016). The terms “Internet finance,” “FinTech,” and “digital After identifying the percentage of internet users per km finance” are almost similar in meaning and are used inter- from the per km population, we ranked it according to rank changeably in China as well as all over the world (Shen & and percentile calculation methods from MS Excel. Huang, 2016; WBG, 2018; Xie et al., 2016). Beyond the tra- Whatever, digital finance or FinTech are the technological ditional financial systems, the involvement of FinTech in the innovations and applications that make the financial services inclusive financial sector is reflected by the emerging issue and processes more efficient (Thompson, 2017). For that rea- FinTech that considers the fastest growing innovations in the son, this study interprets the data sequentially in a user- technology industry and financial markets (Long, 2016). The friendly way relating to finance. All the data are manually FinTech services comprise wide range of financial services categorized by its nature. The central theme of this research such as online banking, third-party payment, direct sales of is also extracted from the reviewed articles, books, and other funds, online insurance, crowdfunding, online banking, and documents. The sequential relationships between all vari- so on (Claessens et al., 2002; Hill & Hill, 2018; Salampasis ables are interpreted in a reader-friendly way. Some direct & Mention, 2018). Whatever, the implications of FinTech on 6 SAGE Open Table 2. Inclusive Finance Forces in China by Province (In Ten Thousand). % of internet Inclusive Finance Forces in users according China by Province (in Ten Area (per ten Population (per ten Internet user to ten thousand 2 2 2) Thousand).Province name thousand km ) thousand km ) (per km population Rank % Beijing-BJ 1.68 1,293.45 1,005.95 77.77 1 100.00 Shanghai-SH 0.62 3,903.23 2,888.71 74.01 2 96.60 Guangdong-GD 19.71 558.04 407.1 72.95 3 93.30 Fujian-FJ 12.31 314.7 217.55 69.13 4 90.00 Zhejiang-ZJ 10.18 549.12 356.78 64.97 5 86.60 Tianjin-TJ 1.13 1,382.3 884.07 63.96 6 83.30 Liaoning-LN 15.1 289.93 181.52 62.61 7 80.00 Jiangsu-JS 10.26 779.63 439.86 56.42 8 76.60 Shanxi-SX 15.71 234.37 129.54 55.27 9 73.30 Xinjiang-XJ 164.69 14.56 7.87 54.05 10 70.00 Qinghai-QH 72.1 8.22 4.44 54.01 11 66.60 Hebei-HB 20.27 368.52 195.17 52.96 12 63.30 Shandong-SD 15.33 648.86 339.66 52.35 13 60.00 Shaanxi-SA 19.58 194.74 101.58 52.16 14 56.60 Nei Menggu-NM 117.75 21.4 11.13 52.01 15 53.30 Jilin-JL 18.7 146.15 74.97 51.3 16 50.00 Hainan-HN 3.43 267.35 137.03 51.25 17 46.60 Hubei-HU 18.75 313.87 160.48 51.13 18 43.30 Chongqing-CQ 8.2 371.71 189.76 51.05 19 40.00 Ningxia-NX 6.64 101.66 51.05 50.22 20 36.60 Heilongjiang-HL 46.36 81.95 39.58 48.3 21 33.30 Guangxi-GX 22.04 219.51 100.41 45.74 22 30.00 Xizang [Tibet]-XZ 122.16 2.71 1.22 45.02 23 26.60 Jiangxi-JX 16.48 278.64 123.48 44.32 24 23.30 Hunan-HN 21.05 324.09 143.14 44.17 25 20.00 Anhui-AH 13.99 442.89 194.5 43.92 26 16.60 Sichuan-SC 48.7 169.65 73.41 43.27 27 13.30 Henan-HE 16.7 570.78 246.11 43.12 28 10.00 Guizhou-GZ 17.4 204.31 87.59 42.87 29 6.60 Gansu-GS 36.65 71.21 30.04 42.19 30 3.30 Yunnan-YN 43.62 109.38 43.37 39.65 31 0.00 Source. Authors’ explanation. Note. Table 2 presents data for the area, population, and internet users of all the provinces of China in 2018. The percentage of internet users is a key finding of this figure based on data per ten thousand people. According to the internet user data, a list with ranking is made here. The ranking includes all 31 provinces and shows the present developing status according to internet finance. inclusive finance pushes forward significant rural growth. access opportunity to the rural people which leads to the Sometimes, FinTech is regarded as the blessing of the devel- development of rural business, SMEs, and rural investment. opment of inclusive finance and rural development. In addi- These developments ultimately lead the rural development. tion, the development of inclusive finance promotes the Figure 2 presents the theoretical framework of inclusive growth of the economy, standard of living, poverty reduc- development. tion, disparity reduction, and agriculture growth. The devel- opment of these forces brings ultimately the inclusive Present Status of FinTech and development, which promotes the development to sustain- Inclusive Finance able long-term economic growth (Salathia, 2014). The rise of new technology allows financial products and services China has the largest number of mobile phone users. It is easy access to the bank premise without physical presence. The to know account balance, billing payments, transaction alerts, concept of automated teller machines (ATMs), agent bank- security alerts, account details, account modification, and ing, mobile banking, and mobile money are the best exam- money transfer. Therefore, the mobile phone is the most essen- ples. Mostly, these services help provide better financial tial device of technological communications. A few years ago, Hasan and Yajuan 7 Figure 1. A framework for the systematic research process (Hasan et al., 2019). Source. Authors’ explanation. people were not used to using smartphones, the internet, and populations are not using smartphone and the internet. These mobile payment. They were just used to using the internet on people are out of the modern financial facility such as online personal computers. However, nowadays, most people, espe- payment, mobile payment, internet banking, POS (point-of- cially young people, use smartphones and the internet for daily sale) device using, ATM card using, and some other services. social and financial communication. However, according to Most of China’s cities have already developed with vari- Figure 3, nearly 41% (almost 600 million) out of the total ous modern and technological facilities. That is why most 8 SAGE Open Figure 2. Theoretical framework of inclusive development through FinTech. Note. This concept of the theoretical framework of this study is taken from D. H. Shin (2016b), D. H.Shin and Park (2017), and Hasan et al. (2019). The figure illustrates the step-by-step process of inclusive development through FinTech. Figure 3. Forces related to inclusive finance. Source. Statista, Worldometers, China Internet Watch, and Knoema. Note. The figure shows the relationship between China’s total populations, smartphone users, and internet usage. Currently, from the total 1,415-million populations, nearly 834-million users use smartphones. From the total number of smartphone users, nearly 815-million people are using the internet on their mobile phones. Therefore, almost half of the population does not use the internet and smartphones [Critical Issue 1]. people prefer to live in urban areas. However, a large portion the number of these users depends on the number of internet of the China’s population still lives in rural areas. As shown in users. Even transaction through the online or mobile pay- Figure 4, nearly 40% of the rural residents use the internet for ment services is only possible when smartphone and internet different purposes. Internet use in urban areas is even more are available and accessible to those people. In China, usu- unpleasant than the rate of internet use in urban areas, where ally Alipay and WeChat pay are the most used payment tools nearly 332-million rural people do not use the internet for any since 2004 and 2014 respectively. These two financial giants purpose. In each case, these rural people lag behind the use of have been influencing the development of inclusive finance the internet, especially in financial communications. This lag as well as the rural economy of China. According to the use of the Internet in every cases is considered to be one of the Alipay’s official website, nearly 520-million people are most challenging factors in developing inclusive finance in using Alipay, and nearly 1,057-million people are using China through financial technologies [Critical Issue 2]. WeChat all around the world; from the total user, 986-million Here, the number of internet users and the number of people are using WeChat in China with almost 14-million online and mobile payment users are directly related, because corporate accounts. Most important information is that Hasan and Yajuan 9 Figure 4. Internet access in inclusive finance. Source. Statista and China Internet Watch. Note. The urban–rural ratio in China is almost 60% to 40%. According to Wikipedia, World Bank data, Statista, and China Internet Watch, the urbanization rates in China were 53.72%, 57.77%, 56.09%, and 57.4% respectively, between 2014 and 2017. However, internet usage rate in both the urban and rural area is not pleasing comparing to the total populations. Figure 4 shows the present comparison and present status of the internet users of the people related to the development of inclusive finance. According to Figure 4, nearly 266-million people living in an urban area do not use the internet [Critical Issue 3]. Figure 5. Mobile payment user. Source. China Internet Watch. Note. The figure shows the year-to-year mobile payment user in China. From the total 815-million internet users, nearly 21% of the total internet users (54% of the entire populations) are not using mobile payment systems and online payment systems [Critical Issue 4]. Here, almost 650-million people are using mobile payment regularly, and the rest of internet users may have payment options, but they do not use the mobile payment for frequent transactions. However, the pleasing mater is that the trend of this rate is increasing rapidly such as this number are increased by 21.6% and 15.66% from 2016 to 2017 and 2017 to 2018 respectively. nearly 800-million WeChat account is active for commercial very fast. Therefore, this will create a great opportunity for transaction purposes. However, according to Figure 5, nearly the development of inclusive finance through technology. 650-million people are using mobile payment regularly for different purposes. Also, people are using government ser- China’s FinTech and Inclusive vice through Alipay and WeChat pay. In this way, Alipay and Development WeChat pay are influencing in every day’s transaction in all over China. Even they have gathered the trust of the users Chinese inclusive finance is the blessed of the development and the institutions. of its FinTech. Chinese FinTech and their supportive policy The previous section of this study discusses the increasing from the government lead the development of its inclusive urbanization rate year by year. That is why it affects the num- finance. In China, FinTech provides different opportunities ber of bank accounts in rural areas. After 2015, the number of by offering technological usage in diverse financial ser- bank accounts in rural areas declined as a result of the vices to develop inclusive finance by persuading financial increased urbanization rate. Moreover, China has not yet companies, credit companies, bank, and such (Zavolokina fully succeeded in dispersing its industrial areas to rural et al., 2016). Most of the financial institutions of China areas. However, there is hope that this number is growing are delivering their financial services using different 10 SAGE Open Figure 6. Technological forces of inclusive finance. Source. Data extracted from Global Financial Inclusion database. Note. The actual present scenario of the description of inclusive finance forces and technological forces are shown in this figure. The first indicator of inclusive finance is the number of bank account that means the access to financial product in the rural area. Although there are almost 494-million people have a bank account, still 494.23 − 443.56 = 50.67-million people do not have a debit card, and almost 494.23 − 354.49 = 139.74-million account owner do not use the internet to pay bills or to buy something online [Critical Issue 5]. technological functions such as ATMs, POS terminal, (Helms, 2006). Usually, FinTech provides six services in instant mobile applications, mobile networks, big data, China such as internet payments (Alipay, Wechat pay), trust management, mobile embedded systems, cloud com- internet lending (Webank, MYbank), internet money mar- puting, image processing, and data analytic techniques ket funds (Yu’E Bao), internet insurance (shipping insur- (Shen & Huang, 2016; WBG, 2016). Whatever, its FinTech ance on Taobao.com), internet credit investigation (Zhima push forward the inclusive finance by offering financial Credit), and internet investment (Yi Rendai, PPmoney) services by financial institutions to SMEs, micro-busi- (Guo et al., 2016). These services are going with a rapid nesses, low-income population in urban areas, farmers, growth rate. Here, some technological tools commonly poor population, senior citizens, and the disabled people. In used in developing inclusive finance in China. These are these ways, people are getting easy access of all financial information systems (financial applications and informa- products and services. Easy access push forward them to tion systems software), connectivity (different network emphasize on SMEs and micro-business. Their online connections such as broadband, dial-up, or satellite), credit shopping is also another influential tool for their massive scoring (computerized analysis of credit), personal digital development of their SMEs and micro-business. More spe- assistants (PDAs), ATMs, internet banking, POS devices, cifically, Taobao and JD.com are their two most commonly biometrics, smart cards, mobile phones, and so forth used online markets. People from all around can easily start (Claessens et al., 2002; Gomber et al., 2018a; Helms, their business in the online marketplace and ship their prod- 2006). From these FinTech tools, internet finance, espe- ucts across the country. This is also considered one of the cially the mobile payment, is considered the most useful most vital forces for their rapid development of the rural and influential in developing Chinese inclusive finance. economy. Their digitalization of payment systems is work- Also, internet finance is one of the major media of using ing behind their rapid development. These are the most technological innovations for the financial transaction. influential debate of China’s inclusive finance. Moreover, all companies work in the rural China to develop inclusive Developing Status by Region finance in China. As most country people live in villages, providing these people with different financial services is Internet finance, digital finance, or FinTech entirely depends very costly because their money is scarce and they usually on the use of internet (Aggarwal, 2014). Thus, based on this live in sparsely populated areas with few credit histories. In dependence, this study identifies and demonstrates the devel- this situation, FinTech has come with blessing in China to oping status of all provinces according to APU proportions. develop its inclusive finance. In this consideration, China In addition, a conclusion about the development of inclusive has robust financial and advanced technological options for finance with the help of internet finance is drawn here. Table future financial growth with many FinTech tools. They are 2 presents here the information regarding the area–popula- also active in their service delivery option with technologi- tion–internet user. cal innovation such as large distribution outlet like ATM to All the provinces are categorized into four groups provide service closer to the poor people even to the under- according to the rank and percent calculation. The first banked people to make them within the baking service group belongs to 76% to 100%, the second group 51% to Hasan and Yajuan 11 Figure 7. Developing status of inclusive finance in China. Source. Author’s explanation. Note. Figure 7 shows the developing status of all provinces through FinTech use. Total four maps are presented here with four colors to identify each group. These four colors have no special meaning. These colors are used here just to make the map easy to understand. In addition, the province code is used here to easily identify the name of the provinces in the map. 75%, the third group 26% to 50%, and the fourth group not have a better opportunity of using these FinTech tools. belongs to below 25%. In this perspective, it is found that From this inductive thinking, it is clear that inclusive the group formation is 8-7-8-8. Here Groups 1 to 4 repre- finance is not so developed in these provinces. On the con- sent most developed to least developed provinces. trary, inclusive finance in the eastern and the southern According to the APU measurement, Group 1 members are China has developed. Since 2004, people in these provinces Beijing, Shanghai, Guangdong, Fujian, Zhejiang, Tianjin, have been utilizing the use of FinTech. However, in the era Liaoning, and Jiangsu. Group 2 members are Shanxi, of FinTech, people who do not use the internet have not Xinjiang, Qinghai, Hebei, Shandong, Shaanxi, and Nei contributed to the development of inclusive finance and Menggu. Group 3 members are Jilin, Hainan, Hubei, economic development. According to the above discussion, Chongqing, Ningxia, Heilongjiang, Guangxi, and Xizang the developing status of inclusive finance in China is shown (Tibet). To end with Group 4, the members are Jiangxi, in Figure 7, with four infographics. The data in Figure 7 are Hunan, Anhui, Sichuan, Henan, Guizhou, Gansu, and linked to Table 2. Yunnan. However, except the provinces categorized in Therefore, according to Table 2 and Figure 7, the scat- Groups 1 and 4, all are almost near to the mean value. tered position of all provinces is presented in Figure 8. The Another view is that, as shown in Figure 7, the third and the scattered position indicates the dispersion of the developing fourth groups are not so developed, as millions of people status among the provinces. still do not have the access of the internet and FinTech The development of inclusive finance through internet tools. Even these people are less aware of the use of smart- finance, particularly Groups 2 and 3, is almost identical. phones, the internet, and FinTech. In some cases, they do They are not highly dispersed, but the dispersion between 12 SAGE Open Figure 8. Scattered position of provinces. Source. Author’s explanation. Note. Figure 8 presents the breakdown of the current developing position in the provinces based on the area–population–user unit base. The scattered positions are pointed by four colors (green, yellow, sky blue, and red). The color sequence green, yellow, sky blue, and red define the most developed to the lowest. These four colors do not have any special meaning. These colors are used here just to make the figures easy to understand. Groups 1 and 4 is very high. This means that Group 1 is smartphone use, internet use, and online payment. When highly developed comparing to Group 4. rural people are more engaged in online shopping, then the need of using a smartphone, using the internet, and using mobile payment systems will arise. Therefore, in this way, Discussion rural people will participate more in financial transactions Nowadays, every financial company is providing service through FinTech. CNNIC also showed in a report that with FinTech such as online payment, mobile payments, almost 47.7% of people use online payment from the total and so forth, therefore, in this case, a significant portion of internet users in rural, comparing to 65.5% in urban areas. rural as well as urban people goes out of the payment sys- Nowadays, the rural people are being inspired by e-com- tems only just for not using the internet. Therefore, in this merce systems, trying to build small industry. In this way, sense, these 600-million people are not contributing to the rural people, especially the small and medium-sized expanding China’s inclusive finance. Whatever, using business owners, are trying to sell their products in online Tencent and Ant Financial strategy, China made the devel- marketplaces such as Taobao and JD.com. opment of inclusive finance very simple. At present, these This buying and selling process is a convenient system are considered all over the world as the most potent instru- because both buyer and seller can transfer money through ment of developing China’s inclusive finance. These ser- P2P systems in their personal Alipay/WeChat Pay wallet vices have the options to link users’ bank account with (Ding et al., 2018; Long, 2016). As the payment system is their Alipay and WeChat pay account. In this way, a very very friendly, rural people can develop micro industry around user-friendly banking platform has established on the the countryside. Even the courier service within and outside mobile phone. This mobile payment system creates the China is excellent and affordable. That is why the small and most important opportunities not only for urban people but medium business owners, especially micro-sectors, are also for rural people (Anagnostopoulos, 2018; Claessens involved in online systems. In addition, the use of innovative et al., 2002). Notable changes occurred in people’s lives information and communication technologies in the large especially getting banking services with branchless bank- number of transactions in SMEs may also help microfinance ing. However, the problem is that many services are not institutions to make transactions more efficient and make available in the rural areas [Critical Issue 6]. Even most commercial banks more interested in providing services to people do not want to use smartphones and the internet. the poor. In addition, many unbanked and underserved rural However, what is happening to rural areas? Alipay and people are gaining financial transaction access by them WeChat pay have already started developing their service (Salampasis & Mention, 2018). Moreover, it can help people for the rural poor and underserved people. Almost 650-mil- to manage their financial risks by providing transaction ser- lion people are using mobile payments. This is somewhat vice to collect money from remote areas within a short time impressive comparing to mobile payment ratio in rural (Boyes & Stone, 2003). Even the branchless channels are areas. Nearly half of the rural internet users are using profitable enough to provide service to low-income custom- mobile payment. In addition, e-commerce creates an influ- ers for a more extended period. However, sometimes it may ential incentive for rural users to purchase a smartphone. create critical situations to deliver a wide range of service However, there is a good relationship among e-commerce, when the customer is not so aware of the service, and also Hasan and Yajuan 13 when financial literacy is a matter of concern [Critical Issue these data. That is why we present the yearly comparison and 7]. However, the development of FinTech companies faces trend of those forces. In future, empirical and scientific different risks such as loss of funds, inadequate disclosure, research on this issue will be needed when the data are suf- data privacy violations, and false promotion [Critical Issue ficient to arrive at empirical decisions. In addition, research 8]. At the same time, a clear regulatory framework should be is important in exploring the impact of FinTech on inclusive put in place to ensure the development of FinTech compa- growth in the provinces. nies. That is why financial legislators should plan more about how FinTech will be more leveraged to serve the remaining Declaration of Conflicting Interests underserved people, particularly in the rural and underdevel- The author(s) declared no potential conflicts of interest with respect oped areas (IMF, 2017). The conscious movement including to the research, authorship, and/or publication of this article. implanting regulatory sandboxes, taking a tiered approach to regulate and supervise, and making a legal and regulatory Funding framework for financial client protection and reducing the The author(s) disclosed receipt of the following financial support risks is vital to develop FinTech for financial inclusion for the research, authorship, and/or publication of this article: This (Anagnostopoulos, 2018; Lee & Shin, 2018). study received financial support from Professor Lu Yajuan (Xuzhou Medical University, Xuzhou and School of Finance, Nanjing Audit University, Nanjing, China). Conclusion The use of FinTech has created more opportunities for rural ORCID iD life in China. The rural people are more familiar with differ- Md. Morshadul Hasan https://orcid.org/0000-0001-9857-9265 ent FinTech tools and preferring to use cashless transaction for daily financial communications. 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2158-2440
DOI
10.1177/2158244019901252
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Abstract

Financial technology, commonly used the term as FinTech, is a key emerging driver of inclusive finance. This is also one of the emerging issues of finance as well as financial research. This research is done with the purpose of showing the present status of China’s FinTech in inclusive finance development. In addition, the study raises regional disparity and critical issues related to the inclusive development. A secondary data analysis methods are systematically carried out to demonstrate the present situation of internet finance in the development of inclusive finance in China, as well as the developing status of different provinces through internet finance. The ultimate finding of this research is that, despite significant development in China’s financial system, there is still a development inequality between the most and least developed regions. This study also identifies some important issues that should be taken care of by the policy makers. This research is done from authentic data also sources with appropriate explanations, which help the readers, academicians, researchers, and others to get comprehensive understanding of China’s FinTech and its influence on inclusive development. Keywords internet finance, FinTech, inclusive finance, financial inclusion, Chinese economy, mobile payment, inclusive development Partnership for Financial Inclusion (GPFI), are helping to Introduction develop the inclusive finance in different ways. In this pros- It is important to reduce the financial crisis, improve the pect, internet finance is regarded to be one of the most influ- financial equity, reduce financial exclusion, and build a sus- ential tools in the development of inclusive finance. In a few tainable inclusive finance to develop the economy of a coun- years, China’s inclusive finance has changed rapidly and they try (Gomber et al., 2018a; Salampasis & Mention, 2018; are regarded as to be the global FinTech leader of the world. Zhou et al., 2018). It is also essential to reduce the economic Even though the revolutionary change started since 2004, the disparity between the rich and the poor. In this context, inclu- massive development occurred after 2013. By developing the sive finance plays crucial roles in stimulating economic rural economy, it is growing day by day. It also contributes to expansion. All core financial forces need be developed to the sustainability and strength of China’s economy. achieve the sustainability of the financial system. This means Economic development is well linked to inclusive finance that both rural finance and urban finance need to be devel- (Long, 2016; Mitra & Das, 2018; Zhou et al., 2015, 2018), oped on an equal footing (Anagnostopoulos, 2018; Ding and inclusive finance is deeply connected to inclusive et al., 2018). In addition to the development of the urban growth (Siddik & Kabiraj, 2020). Therefore, inclusive economy, a well-developed inclusive finance is one of the growth plays important roles in developing the economy. most critical issues in balancing economic and financial More specifically, China’s inclusive finance is one of the development (Fan, 2018; Zhou et al., 2018). Also, the devel- oped inclusive finance can increase gross domestic product School of Finance, Nanjing Audit University, China (GDP) and maximize the country’s long-term social welfare Xuzhou Medical University, Xuzhou, China (Hao, 2017). However, the development of inclusive finance School of Management, University of Science and Technology of China, has come with different success factors that differ from coun- Hefei, China try to country, and is seen as a broader factor in national and Corresponding Author: global development. That is why different international orga- Lu Yajuan, Xuzhou Medical University, Xuzhou 221002, China and School nizations, including the World Bank Group (WBG), the of Finance, Nanjing Audit University, Nanjing 211815, China. Email: luyajuan66@126.com Alliance for Financial Inclusion (AFI), and the Global Creative Commons CC BY: This article is distributed under the terms of the Creative Commons Attribution 4.0 License (https://creativecommons.org/licenses/by/4.0/) which permits any use, reproduction and distribution of the work without further permission provided the original work is attributed as specified on the SAGE and Open Access pages (https://us.sagepub.com/en-us/nam/open-access-at-sage). 2 SAGE Open most prominent examples in the last two decades. China’s of past studies, the shortcomings or challenges of these stud- rapid growth of FinTech significantly influences its devel- ies, and future research directions. opment of inclusive finance. All over the countryside, peo- ple use Fintech, which creates massive opportunity to Method financial access to rural people. It has been working as strong helping hand as their inclusive development. Easy We conducted this research based on some studies conducted access of financial products and services makes the rural life by Guo et al. (2016), Huang et al. (2016), J. Wang et al. much easier than the earlier days. People from countryside (2016), Long (2016), Lee and Shin (2018), and Xie et al. easily start their business, develop family business, small- (2016). Also, a number of studies related to inclusive finance and medium-sized enterprises (SMEs), and involve in rural and FinTech have been analyzed as based on articles such as investment. These lead China’s inclusive finance toward a research done by Zhou et al. (2018) and Tam and Hanh stable rural development. As the economic development and (2018). Whatever, internet finance is associated with financial inclusion are directly related, most of the studies the existing financial institution in China, such as banks, are focused on the individual factors of financial inclusion. insurance, securities, and investments companies, and pro- Few studies have addressed the FinTech or internet finance vides innovative financial solutions (Hung & Luo, 2016; context in the development of inclusive finance; specifi- Thompson, 2017). In this prospect, different phenomena, cally, emphasizing the inclusive development through changing effects, and the relationship among the technolo- FinTech is very rare. Even a small number of researches gies to explore the influence of internet finance on inclusive illustrated the inclusive developing status of all provinces of finance are analyzed here from different perspectives (Cukier China. Researchers have found this research gap. After et al., 2009). A systematic literature review analysis is fol- exploring the research gap and the literature of FinTech ele- lowed to accomplish the goal of this study. ments on both the development of inclusive finance and the rural development, the subsequent stages of the develop- Data Collection and Content Analysis ment of China’s inclusive finance and rural development through FinTech are presented in this research. The view of Database for FinTech or internet finance is not as rich as different authors, researcher, fellows, and others has been other financial topics, and inclusive finance database is not gathered and considered here to accomplish the research so widespread. That is why the data used in this article is objectives. This research aims to provide an essential dis- collected from variety of sources using multiple methods cussion from the understanding of FinTech and inclusive (D. H. Shin & Park, 2017). When using content analysis, finance. However, after studying the related literature of this most articles were collected from secondary sources (Hasan research, specific objectives are specified. The objectives et al., 2018; Hasan & Mahmud, 2017a, 2017b; Nekmahmud are to identify the present circumstances of related forces of & Rahman, 2018; D. H. Shin & Park, 2017). This study FinTech in inclusive finance (Objective 1), to illustrate the mostly based on finding out the critical phenomenon of dispersion of regional inclusive development of all prov- FinTech and inclusive finance with an interpretative inces through FinTech (Objective 2), and to identify the approach from the secondary data (Majedul Huq et al., critical issues existing in the development of inclusive 2016; Zavolokina et al., 2016). Many research articles, finance through FinTech (Objective 3). review articles, case studies, and conference paper have All the three objectives are accomplished here sequen- identified and collected from secondary sources. Following tially. The discussion on Objective 1 is presented in the sec- the research done by Hasan et al. (2019), data were collected tion “Present Status of FinTech and Inclusive Finance.” The in a systematic process. At first, the two best-indexed data- second objective is set out in the section “Developing Status bases Scopus® by Elsevier B.V and Web of Science Core™ by Region.” Finally, the third objective is introduced in both were selected to maintain the quality of the collected arti- the finding sections with a remark of Critical Issue. In total, cles. After that, we emphasized the search options of some eight critical issues are identified in these studies. reputed journal publishers such as Elsevier, Emerald, Springer, Taylor & Francis, Wiley, Sage, and so forth. These publishers usually publish most of the prominent journals of Literature Review business, finance, and economics. Also, data were collected Most previous studies have focused on internet finance, from Google Scholar and ResearchGate, which are the plat- FinTech, and inclusive finance. Most of the researchers high- forms of the researchers and academician to collect the light the online payment systems as one of the most influen- related research articles. Different studies based on FinTech, tial forces of inclusive development. China’s online shopping internet finance, digital finance, inclusive finance, rural marketplace is also remarkable part of their rural develop- finance, and financial inclusion are centralized here. In ment. Based on these studies, Table 1 shows a comprehen- addition, some articles were collected from the World Bank sive overview of the literature. This overview includes the database, which is regarded as one of the best databases for content of this study, the author’s information, the findings financial inclusion research. Whatever, all variables are 3 Table 1. A Comprehensive Overview of the Key Aspects of This Research. Content Authors Findings Shortcomings/challenges Future research direction Financial technology Ashta & Biot-Paquerot (2018); Chiu •• FinTech has five technologies such as security •• The challenges within the financial •• Data-Driven FinTech (2017); Davis et al. (2017); Gabor and privacy, hardware and infrastructure, data services sector are market Framework (DF2) has & Brooks (2017); Gai et al. (2018); technology, applications and management, and participants, global interoperability, proposed to facilitate and Gomber et al. (2018a); Greenspan service models consolidation activity, collaboration standardize future FinTech (2000); Huang et al. (2016); G. •• The exploration of FinTech interactions is related to models, technological development, researches as well as Li et al. (2017); Long (2016); social and political context and tech-company disruptions technical deployments Puschmann (2017); Salampasis •• The successful development of China’s FinTech •• After 2015, almost 1,263 P2P failing •• A comparison should be & Mention (2018); Shim & Shin industry is directly related to its technological platforms closed, and every 3 P2P made in the future of (2016); G-24 (2018) development and the policies of the Chinese companies became a problem Chinese FinTech industries government platform to other countries. •• There are some reasons behind the growth of •• The entry barriers of P2P company •• Sustainability of inclusive FinTech: cheap communication (mobile, internet), in the market are low because they financial systems will be big data analysis allows efficient targeting, people just need to register as ordinary explored are comfortable with online money, bank staff lose commercial enterprises. In this case, •• Each part of digital finance interest in being locked inside a megabank, low- they have no strict restrictions business functions should interest rate, and banking regulation side-stepped on the business scope, ratio of be explored in future •• Digitization of the financial services industry, registered capital, risk monitoring, research changing role of IT, and changing consumer behavior evaluation capacity, and so on •• What will be the •• Online payment boosted Chinese online shopping. •• Sometimes FinTech service performance, and the side It motives to increase GDP and maximize China’s companies face different difficulties effects of digital finance social welfare in meeting the demand for a large under diverse market number of customers situations in the entire •• Financial transparency for all sector has •• Lack of information usages limit economic cycle? developed the risk warning functions and the •• The justifications and •• Branches and ATM both are still lower than Brazil evaluation of the credit reporting variability (e.g., accessible (another country moving with financial inclusion) system financial service, •• Some encouraging factors of mobile payment are •• Sometimes it faces problems in profitability, funding socioeconomic conditions, cost efficiency, diffusion efficient operations costs, effectively and of mobile phones, convenience, new initiatives, and •• Financial exclusion is the major prudently, and commercial so on problem sustainability) of different •• Requirements for mobile payment project •• Inclusive finance research in all over business related to digital deployment: usability and simplicity, universality, China is still not developed; even finance will be explored interoperability, cost and speed, integrality, security, there is a lack of comprehensive •• The relationship between trust, and privacy, local market understanding, and representation of those researches. digital finance or FinTech cross-border payments •• Massive numbers of people are and systemic risks shall be •• Digital finance business functions include digital excluded in accessing financial explored financing, investment, digital currency, payment, services in all form of the •• “First-mover advantages,” insurance, financial advice, and so on economy—macro, micro, and meso financial safety, and •• Even if the internet influences the systems of •• Some challenges are heavy stability shall be explored organizations and financial transactions, the basic regulations and restrictions, limited functions of financial activities remain unchanged collaboration, underdeveloped •• The IoT is currently emerging as the next megatrend ecosystem, security problems, and in technology, with repercussions across the so on spectrum of society and business •• In some area, the crowdfunding •• Competitive internet markets and high-quality still is in the initial stage of its infrastructure have removed different challenges development with the appearance of convergence services; changes are beginning to occur •• Advanced technology is drastically revolutionizing industry and society and is becoming an integral part of everyday life (continued) 4 Table 1. (continued) Content Authors Findings Shortcomings/challenges Future research direction Inclusive finance/financial Aggarwal (2014); Chakravarty & Pal inclusion (2013); Gabor & Brooks (2017); Hao (2017); Helms (2006); Huang et al. (2016); Patwardhan (2017); Sharma et al. (2013) Rural development/ Ding et al. (2018); Long (2016); S. microfinance in China Wang & Richter (2009) Online/mobile banking/ Chen et al. (2017); Iman (2018); Jun online payment & Yeo (2016); Thompson (2017); Yoon & Jun (2018) Internet finance/digital Boyes & Stone (2003); Claessens finance et al. (2002); Gomber et al. (2017); Guo et al. (2016); Helms (2006); Huang et al. (2016); Hung & Luo (2001); Khraisha & Arthur (2018); Shen & Huang (2016); J. Wang et al. (2016); Wonglimpiyarat (2018); Xie et al. (2016); Gomber et al. (2018a); Gomber et al. (2018b); Gomber et al. (2017) FinTech and others Anagnostopoulos (2018); Buchak et al. (2017); Cumming & Schwienbacher (2018); Fan (2018); Gimpel et al. (2018); Gomber et al. (2018a); Gozman et al. (2018); Hornuf & Haddad (2016); Hung & Luo (2016); Jagtiani & Lemieux (2018); Jakšič & Marinč (2018); Lee & Shin (2018); Leong et al. (2017); Y. Li et al. (2017); Ma & Liu (2017); Nakashima (2018); Ohdoi (2018); Shim & Shin (2016); D. H. Shin (2016b, 2016a); D. D. Shin (2019); D. H. Shin & Lee (2017); D. H. Shin & Park (2017); Todorof (2018); Zavolokina et al. (2016) Note. IT = information technology; GDP = gross domestic product; IoT = Internet of Things. Hasan and Yajuan 5 selected by relating to internet finance, FinTech, and inclu- quotations are quoted to make the readers understand better. sive finance. Here, the working population and nonworking Here, we have used content analysis, infographic presenta- population, and constant population and moving population tion (Lankow et al., 2012; Siricharoen & Siricharoen, 2015; have characterized as parts of the population. From this Smiciklas, 2012), and exploratory research method to aspect, we have just considered the population by citizen- achieve the goal of this study (Stoeckli et al., 2018; ship. For instance, total population by province to province is Zavolokina et al., 2016). The relationships between the data selected according to the citizenship criteria. are presented in different infographic tools, such as graphs, charts, and tables (Siricharoen & Siricharoen, 2015). Data Analysis and Interpretation Research Framework This study shows the developing status of inclusive finance development through internet finance. According to the A systematic research process is followed here. The concept China Internet Network Information Center (CNNIC), of a research framework is taken from Hasan et al. (2019) to almost 97% of people who use internet use internet on their finish this article. A systematic presentation of the entire mobile phone. That is why smartphones and the internet are research process for the study is presented in Figure 1. the two most important variables for the development of inclusive finance through internet finance, and here we Theoretical Framework related internet use with the developing status. However, Table 2 shows ranking and percentile calculation to show Inclusive finance is directly related to the accessibility of the state of developing of all provinces based on internet financial services that comprise a wide range of financial finance assumptions. To show a more accurate result, the products and services accessible to low-income and unbanked APU percentage calculation method is used here (in this people, mainly living in rural area. Also, it means that all the case, A for Area, P for Population, and U for User). This adults should have access to appropriate financial product method is used here because the areas of all provinces are and services. Typically, this process starts with opening a not the same. bank account or a financial transaction account (Demirguc- If we count only internet user, Shanghai stands first rather Kunt et al., 2017). In most cases, traditional financial prod- than Beijing, because the number of internet users in ucts and services overlook rural people because of their Shanghai is bigger than in Beijing. However, Beijing is meager income. That is why the innovative and updated standing here as first because the ranking is calculated con- financial services are working to provide better access oppor- sidering not only the users but also the area and total popula- tunity to those financially excluded people. It helps them to tion of the respective provinces. Therefore, inaccurate save money, support their business and families, hedge ranking may arise only by user ranking. However, the per- against every day’s risks, and promote their financial activi- centage calculated by the APU method shows that the per- ties. These new and innovative financial services fully centage in Beijing is higher than that of Shanghai. In this undergo through the technological innovations. These tech- sense, the percentage of per km2 internet user from per km2 nological innovations play very important roles in providing population is calculated here to show a more accurate devel- better financial access to rural people. These services are oping status. The APU formula is given below: referred as FinTech, which is very popular in the present times as the financial market, and its rapid development is an Internet User emerging issue of the finance world (Casanova et al., 2018; TotalAreakm () Area −− PopulationUser APU unit = ×100 () T TotalPopulation Gai et al., 2018; Gimpel et al., 2018). It is the combined form TotalAreakm () of “Finance” and “Technology” (Zavolokina et al., 2016). The terms “Internet finance,” “FinTech,” and “digital After identifying the percentage of internet users per km finance” are almost similar in meaning and are used inter- from the per km population, we ranked it according to rank changeably in China as well as all over the world (Shen & and percentile calculation methods from MS Excel. Huang, 2016; WBG, 2018; Xie et al., 2016). Beyond the tra- Whatever, digital finance or FinTech are the technological ditional financial systems, the involvement of FinTech in the innovations and applications that make the financial services inclusive financial sector is reflected by the emerging issue and processes more efficient (Thompson, 2017). For that rea- FinTech that considers the fastest growing innovations in the son, this study interprets the data sequentially in a user- technology industry and financial markets (Long, 2016). The friendly way relating to finance. All the data are manually FinTech services comprise wide range of financial services categorized by its nature. The central theme of this research such as online banking, third-party payment, direct sales of is also extracted from the reviewed articles, books, and other funds, online insurance, crowdfunding, online banking, and documents. The sequential relationships between all vari- so on (Claessens et al., 2002; Hill & Hill, 2018; Salampasis ables are interpreted in a reader-friendly way. Some direct & Mention, 2018). Whatever, the implications of FinTech on 6 SAGE Open Table 2. Inclusive Finance Forces in China by Province (In Ten Thousand). % of internet Inclusive Finance Forces in users according China by Province (in Ten Area (per ten Population (per ten Internet user to ten thousand 2 2 2) Thousand).Province name thousand km ) thousand km ) (per km population Rank % Beijing-BJ 1.68 1,293.45 1,005.95 77.77 1 100.00 Shanghai-SH 0.62 3,903.23 2,888.71 74.01 2 96.60 Guangdong-GD 19.71 558.04 407.1 72.95 3 93.30 Fujian-FJ 12.31 314.7 217.55 69.13 4 90.00 Zhejiang-ZJ 10.18 549.12 356.78 64.97 5 86.60 Tianjin-TJ 1.13 1,382.3 884.07 63.96 6 83.30 Liaoning-LN 15.1 289.93 181.52 62.61 7 80.00 Jiangsu-JS 10.26 779.63 439.86 56.42 8 76.60 Shanxi-SX 15.71 234.37 129.54 55.27 9 73.30 Xinjiang-XJ 164.69 14.56 7.87 54.05 10 70.00 Qinghai-QH 72.1 8.22 4.44 54.01 11 66.60 Hebei-HB 20.27 368.52 195.17 52.96 12 63.30 Shandong-SD 15.33 648.86 339.66 52.35 13 60.00 Shaanxi-SA 19.58 194.74 101.58 52.16 14 56.60 Nei Menggu-NM 117.75 21.4 11.13 52.01 15 53.30 Jilin-JL 18.7 146.15 74.97 51.3 16 50.00 Hainan-HN 3.43 267.35 137.03 51.25 17 46.60 Hubei-HU 18.75 313.87 160.48 51.13 18 43.30 Chongqing-CQ 8.2 371.71 189.76 51.05 19 40.00 Ningxia-NX 6.64 101.66 51.05 50.22 20 36.60 Heilongjiang-HL 46.36 81.95 39.58 48.3 21 33.30 Guangxi-GX 22.04 219.51 100.41 45.74 22 30.00 Xizang [Tibet]-XZ 122.16 2.71 1.22 45.02 23 26.60 Jiangxi-JX 16.48 278.64 123.48 44.32 24 23.30 Hunan-HN 21.05 324.09 143.14 44.17 25 20.00 Anhui-AH 13.99 442.89 194.5 43.92 26 16.60 Sichuan-SC 48.7 169.65 73.41 43.27 27 13.30 Henan-HE 16.7 570.78 246.11 43.12 28 10.00 Guizhou-GZ 17.4 204.31 87.59 42.87 29 6.60 Gansu-GS 36.65 71.21 30.04 42.19 30 3.30 Yunnan-YN 43.62 109.38 43.37 39.65 31 0.00 Source. Authors’ explanation. Note. Table 2 presents data for the area, population, and internet users of all the provinces of China in 2018. The percentage of internet users is a key finding of this figure based on data per ten thousand people. According to the internet user data, a list with ranking is made here. The ranking includes all 31 provinces and shows the present developing status according to internet finance. inclusive finance pushes forward significant rural growth. access opportunity to the rural people which leads to the Sometimes, FinTech is regarded as the blessing of the devel- development of rural business, SMEs, and rural investment. opment of inclusive finance and rural development. In addi- These developments ultimately lead the rural development. tion, the development of inclusive finance promotes the Figure 2 presents the theoretical framework of inclusive growth of the economy, standard of living, poverty reduc- development. tion, disparity reduction, and agriculture growth. The devel- opment of these forces brings ultimately the inclusive Present Status of FinTech and development, which promotes the development to sustain- Inclusive Finance able long-term economic growth (Salathia, 2014). The rise of new technology allows financial products and services China has the largest number of mobile phone users. It is easy access to the bank premise without physical presence. The to know account balance, billing payments, transaction alerts, concept of automated teller machines (ATMs), agent bank- security alerts, account details, account modification, and ing, mobile banking, and mobile money are the best exam- money transfer. Therefore, the mobile phone is the most essen- ples. Mostly, these services help provide better financial tial device of technological communications. A few years ago, Hasan and Yajuan 7 Figure 1. A framework for the systematic research process (Hasan et al., 2019). Source. Authors’ explanation. people were not used to using smartphones, the internet, and populations are not using smartphone and the internet. These mobile payment. They were just used to using the internet on people are out of the modern financial facility such as online personal computers. However, nowadays, most people, espe- payment, mobile payment, internet banking, POS (point-of- cially young people, use smartphones and the internet for daily sale) device using, ATM card using, and some other services. social and financial communication. However, according to Most of China’s cities have already developed with vari- Figure 3, nearly 41% (almost 600 million) out of the total ous modern and technological facilities. That is why most 8 SAGE Open Figure 2. Theoretical framework of inclusive development through FinTech. Note. This concept of the theoretical framework of this study is taken from D. H. Shin (2016b), D. H.Shin and Park (2017), and Hasan et al. (2019). The figure illustrates the step-by-step process of inclusive development through FinTech. Figure 3. Forces related to inclusive finance. Source. Statista, Worldometers, China Internet Watch, and Knoema. Note. The figure shows the relationship between China’s total populations, smartphone users, and internet usage. Currently, from the total 1,415-million populations, nearly 834-million users use smartphones. From the total number of smartphone users, nearly 815-million people are using the internet on their mobile phones. Therefore, almost half of the population does not use the internet and smartphones [Critical Issue 1]. people prefer to live in urban areas. However, a large portion the number of these users depends on the number of internet of the China’s population still lives in rural areas. As shown in users. Even transaction through the online or mobile pay- Figure 4, nearly 40% of the rural residents use the internet for ment services is only possible when smartphone and internet different purposes. Internet use in urban areas is even more are available and accessible to those people. In China, usu- unpleasant than the rate of internet use in urban areas, where ally Alipay and WeChat pay are the most used payment tools nearly 332-million rural people do not use the internet for any since 2004 and 2014 respectively. These two financial giants purpose. In each case, these rural people lag behind the use of have been influencing the development of inclusive finance the internet, especially in financial communications. This lag as well as the rural economy of China. According to the use of the Internet in every cases is considered to be one of the Alipay’s official website, nearly 520-million people are most challenging factors in developing inclusive finance in using Alipay, and nearly 1,057-million people are using China through financial technologies [Critical Issue 2]. WeChat all around the world; from the total user, 986-million Here, the number of internet users and the number of people are using WeChat in China with almost 14-million online and mobile payment users are directly related, because corporate accounts. Most important information is that Hasan and Yajuan 9 Figure 4. Internet access in inclusive finance. Source. Statista and China Internet Watch. Note. The urban–rural ratio in China is almost 60% to 40%. According to Wikipedia, World Bank data, Statista, and China Internet Watch, the urbanization rates in China were 53.72%, 57.77%, 56.09%, and 57.4% respectively, between 2014 and 2017. However, internet usage rate in both the urban and rural area is not pleasing comparing to the total populations. Figure 4 shows the present comparison and present status of the internet users of the people related to the development of inclusive finance. According to Figure 4, nearly 266-million people living in an urban area do not use the internet [Critical Issue 3]. Figure 5. Mobile payment user. Source. China Internet Watch. Note. The figure shows the year-to-year mobile payment user in China. From the total 815-million internet users, nearly 21% of the total internet users (54% of the entire populations) are not using mobile payment systems and online payment systems [Critical Issue 4]. Here, almost 650-million people are using mobile payment regularly, and the rest of internet users may have payment options, but they do not use the mobile payment for frequent transactions. However, the pleasing mater is that the trend of this rate is increasing rapidly such as this number are increased by 21.6% and 15.66% from 2016 to 2017 and 2017 to 2018 respectively. nearly 800-million WeChat account is active for commercial very fast. Therefore, this will create a great opportunity for transaction purposes. However, according to Figure 5, nearly the development of inclusive finance through technology. 650-million people are using mobile payment regularly for different purposes. Also, people are using government ser- China’s FinTech and Inclusive vice through Alipay and WeChat pay. In this way, Alipay and Development WeChat pay are influencing in every day’s transaction in all over China. Even they have gathered the trust of the users Chinese inclusive finance is the blessed of the development and the institutions. of its FinTech. Chinese FinTech and their supportive policy The previous section of this study discusses the increasing from the government lead the development of its inclusive urbanization rate year by year. That is why it affects the num- finance. In China, FinTech provides different opportunities ber of bank accounts in rural areas. After 2015, the number of by offering technological usage in diverse financial ser- bank accounts in rural areas declined as a result of the vices to develop inclusive finance by persuading financial increased urbanization rate. Moreover, China has not yet companies, credit companies, bank, and such (Zavolokina fully succeeded in dispersing its industrial areas to rural et al., 2016). Most of the financial institutions of China areas. However, there is hope that this number is growing are delivering their financial services using different 10 SAGE Open Figure 6. Technological forces of inclusive finance. Source. Data extracted from Global Financial Inclusion database. Note. The actual present scenario of the description of inclusive finance forces and technological forces are shown in this figure. The first indicator of inclusive finance is the number of bank account that means the access to financial product in the rural area. Although there are almost 494-million people have a bank account, still 494.23 − 443.56 = 50.67-million people do not have a debit card, and almost 494.23 − 354.49 = 139.74-million account owner do not use the internet to pay bills or to buy something online [Critical Issue 5]. technological functions such as ATMs, POS terminal, (Helms, 2006). Usually, FinTech provides six services in instant mobile applications, mobile networks, big data, China such as internet payments (Alipay, Wechat pay), trust management, mobile embedded systems, cloud com- internet lending (Webank, MYbank), internet money mar- puting, image processing, and data analytic techniques ket funds (Yu’E Bao), internet insurance (shipping insur- (Shen & Huang, 2016; WBG, 2016). Whatever, its FinTech ance on Taobao.com), internet credit investigation (Zhima push forward the inclusive finance by offering financial Credit), and internet investment (Yi Rendai, PPmoney) services by financial institutions to SMEs, micro-busi- (Guo et al., 2016). These services are going with a rapid nesses, low-income population in urban areas, farmers, growth rate. Here, some technological tools commonly poor population, senior citizens, and the disabled people. In used in developing inclusive finance in China. These are these ways, people are getting easy access of all financial information systems (financial applications and informa- products and services. Easy access push forward them to tion systems software), connectivity (different network emphasize on SMEs and micro-business. Their online connections such as broadband, dial-up, or satellite), credit shopping is also another influential tool for their massive scoring (computerized analysis of credit), personal digital development of their SMEs and micro-business. More spe- assistants (PDAs), ATMs, internet banking, POS devices, cifically, Taobao and JD.com are their two most commonly biometrics, smart cards, mobile phones, and so forth used online markets. People from all around can easily start (Claessens et al., 2002; Gomber et al., 2018a; Helms, their business in the online marketplace and ship their prod- 2006). From these FinTech tools, internet finance, espe- ucts across the country. This is also considered one of the cially the mobile payment, is considered the most useful most vital forces for their rapid development of the rural and influential in developing Chinese inclusive finance. economy. Their digitalization of payment systems is work- Also, internet finance is one of the major media of using ing behind their rapid development. These are the most technological innovations for the financial transaction. influential debate of China’s inclusive finance. Moreover, all companies work in the rural China to develop inclusive Developing Status by Region finance in China. As most country people live in villages, providing these people with different financial services is Internet finance, digital finance, or FinTech entirely depends very costly because their money is scarce and they usually on the use of internet (Aggarwal, 2014). Thus, based on this live in sparsely populated areas with few credit histories. In dependence, this study identifies and demonstrates the devel- this situation, FinTech has come with blessing in China to oping status of all provinces according to APU proportions. develop its inclusive finance. In this consideration, China In addition, a conclusion about the development of inclusive has robust financial and advanced technological options for finance with the help of internet finance is drawn here. Table future financial growth with many FinTech tools. They are 2 presents here the information regarding the area–popula- also active in their service delivery option with technologi- tion–internet user. cal innovation such as large distribution outlet like ATM to All the provinces are categorized into four groups provide service closer to the poor people even to the under- according to the rank and percent calculation. The first banked people to make them within the baking service group belongs to 76% to 100%, the second group 51% to Hasan and Yajuan 11 Figure 7. Developing status of inclusive finance in China. Source. Author’s explanation. Note. Figure 7 shows the developing status of all provinces through FinTech use. Total four maps are presented here with four colors to identify each group. These four colors have no special meaning. These colors are used here just to make the map easy to understand. In addition, the province code is used here to easily identify the name of the provinces in the map. 75%, the third group 26% to 50%, and the fourth group not have a better opportunity of using these FinTech tools. belongs to below 25%. In this perspective, it is found that From this inductive thinking, it is clear that inclusive the group formation is 8-7-8-8. Here Groups 1 to 4 repre- finance is not so developed in these provinces. On the con- sent most developed to least developed provinces. trary, inclusive finance in the eastern and the southern According to the APU measurement, Group 1 members are China has developed. Since 2004, people in these provinces Beijing, Shanghai, Guangdong, Fujian, Zhejiang, Tianjin, have been utilizing the use of FinTech. However, in the era Liaoning, and Jiangsu. Group 2 members are Shanxi, of FinTech, people who do not use the internet have not Xinjiang, Qinghai, Hebei, Shandong, Shaanxi, and Nei contributed to the development of inclusive finance and Menggu. Group 3 members are Jilin, Hainan, Hubei, economic development. According to the above discussion, Chongqing, Ningxia, Heilongjiang, Guangxi, and Xizang the developing status of inclusive finance in China is shown (Tibet). To end with Group 4, the members are Jiangxi, in Figure 7, with four infographics. The data in Figure 7 are Hunan, Anhui, Sichuan, Henan, Guizhou, Gansu, and linked to Table 2. Yunnan. However, except the provinces categorized in Therefore, according to Table 2 and Figure 7, the scat- Groups 1 and 4, all are almost near to the mean value. tered position of all provinces is presented in Figure 8. The Another view is that, as shown in Figure 7, the third and the scattered position indicates the dispersion of the developing fourth groups are not so developed, as millions of people status among the provinces. still do not have the access of the internet and FinTech The development of inclusive finance through internet tools. Even these people are less aware of the use of smart- finance, particularly Groups 2 and 3, is almost identical. phones, the internet, and FinTech. In some cases, they do They are not highly dispersed, but the dispersion between 12 SAGE Open Figure 8. Scattered position of provinces. Source. Author’s explanation. Note. Figure 8 presents the breakdown of the current developing position in the provinces based on the area–population–user unit base. The scattered positions are pointed by four colors (green, yellow, sky blue, and red). The color sequence green, yellow, sky blue, and red define the most developed to the lowest. These four colors do not have any special meaning. These colors are used here just to make the figures easy to understand. Groups 1 and 4 is very high. This means that Group 1 is smartphone use, internet use, and online payment. When highly developed comparing to Group 4. rural people are more engaged in online shopping, then the need of using a smartphone, using the internet, and using mobile payment systems will arise. Therefore, in this way, Discussion rural people will participate more in financial transactions Nowadays, every financial company is providing service through FinTech. CNNIC also showed in a report that with FinTech such as online payment, mobile payments, almost 47.7% of people use online payment from the total and so forth, therefore, in this case, a significant portion of internet users in rural, comparing to 65.5% in urban areas. rural as well as urban people goes out of the payment sys- Nowadays, the rural people are being inspired by e-com- tems only just for not using the internet. Therefore, in this merce systems, trying to build small industry. In this way, sense, these 600-million people are not contributing to the rural people, especially the small and medium-sized expanding China’s inclusive finance. Whatever, using business owners, are trying to sell their products in online Tencent and Ant Financial strategy, China made the devel- marketplaces such as Taobao and JD.com. opment of inclusive finance very simple. At present, these This buying and selling process is a convenient system are considered all over the world as the most potent instru- because both buyer and seller can transfer money through ment of developing China’s inclusive finance. These ser- P2P systems in their personal Alipay/WeChat Pay wallet vices have the options to link users’ bank account with (Ding et al., 2018; Long, 2016). As the payment system is their Alipay and WeChat pay account. In this way, a very very friendly, rural people can develop micro industry around user-friendly banking platform has established on the the countryside. Even the courier service within and outside mobile phone. This mobile payment system creates the China is excellent and affordable. That is why the small and most important opportunities not only for urban people but medium business owners, especially micro-sectors, are also for rural people (Anagnostopoulos, 2018; Claessens involved in online systems. In addition, the use of innovative et al., 2002). Notable changes occurred in people’s lives information and communication technologies in the large especially getting banking services with branchless bank- number of transactions in SMEs may also help microfinance ing. However, the problem is that many services are not institutions to make transactions more efficient and make available in the rural areas [Critical Issue 6]. Even most commercial banks more interested in providing services to people do not want to use smartphones and the internet. the poor. In addition, many unbanked and underserved rural However, what is happening to rural areas? Alipay and people are gaining financial transaction access by them WeChat pay have already started developing their service (Salampasis & Mention, 2018). Moreover, it can help people for the rural poor and underserved people. Almost 650-mil- to manage their financial risks by providing transaction ser- lion people are using mobile payments. This is somewhat vice to collect money from remote areas within a short time impressive comparing to mobile payment ratio in rural (Boyes & Stone, 2003). Even the branchless channels are areas. Nearly half of the rural internet users are using profitable enough to provide service to low-income custom- mobile payment. In addition, e-commerce creates an influ- ers for a more extended period. However, sometimes it may ential incentive for rural users to purchase a smartphone. create critical situations to deliver a wide range of service However, there is a good relationship among e-commerce, when the customer is not so aware of the service, and also Hasan and Yajuan 13 when financial literacy is a matter of concern [Critical Issue these data. That is why we present the yearly comparison and 7]. However, the development of FinTech companies faces trend of those forces. In future, empirical and scientific different risks such as loss of funds, inadequate disclosure, research on this issue will be needed when the data are suf- data privacy violations, and false promotion [Critical Issue ficient to arrive at empirical decisions. In addition, research 8]. At the same time, a clear regulatory framework should be is important in exploring the impact of FinTech on inclusive put in place to ensure the development of FinTech compa- growth in the provinces. nies. That is why financial legislators should plan more about how FinTech will be more leveraged to serve the remaining Declaration of Conflicting Interests underserved people, particularly in the rural and underdevel- The author(s) declared no potential conflicts of interest with respect oped areas (IMF, 2017). The conscious movement including to the research, authorship, and/or publication of this article. implanting regulatory sandboxes, taking a tiered approach to regulate and supervise, and making a legal and regulatory Funding framework for financial client protection and reducing the The author(s) disclosed receipt of the following financial support risks is vital to develop FinTech for financial inclusion for the research, authorship, and/or publication of this article: This (Anagnostopoulos, 2018; Lee & Shin, 2018). study received financial support from Professor Lu Yajuan (Xuzhou Medical University, Xuzhou and School of Finance, Nanjing Audit University, Nanjing, China). Conclusion The use of FinTech has created more opportunities for rural ORCID iD life in China. The rural people are more familiar with differ- Md. Morshadul Hasan https://orcid.org/0000-0001-9857-9265 ent FinTech tools and preferring to use cashless transaction for daily financial communications. 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SAGE OpenSAGE

Published: Feb 5, 2020

Keywords: internet finance; FinTech; inclusive finance; financial inclusion; Chinese economy; mobile payment; inclusive development

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