Over the past weekend, Alipay announced that it processed about US$150 billion in mobile payments in 2013 which is potentially more than PayPal and Square combined. PayPal cleared US$27 billion in 2013 and Square's number is not public, but likely far less than even PayPal's. 

That's a huge number and makes Alipay the largest mobile payments platform in the world. It wasn't really a question of if it would happen, but when. With over 300 million users and 100 million mobile users, Alipay's mobile payment growth has tremendous market scale which is part of the reason for the success of their Yu'ebao investment product that just seems to keep growing and growing... 

According to data from the China Securities Depository and Clearing Corporation Limited (CSDC), there were 261 new Qualified Foreign Institutional Investor (QFII) accounts opened in 2013 which represents about 43% of the total QFII account number from 2003 to 2013. Compared to 2012 figure. Number of QFII accounts rises by 129%.

So why are foreign investment institutions so interested in opening up accounts to trade the Chinese market when returns are so low? One reason is that the mainland regulators have been pushing towards more open markets and lowering the QFII requirements with the intent of introducing foreign capital to provide better liquidity in an anemic a-share mainland market. In addition to new accounts, more than $49.7 billion in QFII investment quota was approved in 2013.

The potential second reason is that foreign investors see potential opportunities in the mainland market either with current relatively low valuations or in the anticipation of future market growth if the market does pick up. 

As Chinese New Year wraps up and people (very!) gradually come back to work in mainland China, we wanted to take a step back and look at where we are with Bitcoin in China for the year of the horse.

Thank you to everyone who attended the Top-10 China Financial Technology trends webinar just over a week ago.

The sheer size of China's population and geography means that you get some pretty amazing statistics out of it. Couple that with increasing internet and mobile penetration and you have some pretty sizable numbers.

For decades, China has been known as the imitator and not the innovator. The argument goes that the West came up with social networking, mobile payments, group-buying, etc. and China imitated it, sometimes better, sometimes worse. C2C – copy to China. R&D – rob and duplicate. There are numerous terms to describe it. 

The Shanghai Stock Exchange has been in the doldrums for the past couple of years and was the worst performing Asian exchange of 2013.

2013 will remembered as an incredibly dynamic year for China’s financial services industry. From the increasing number of hedge funds in the market to the emergence and regulation of Bitcoin, industry observers, investors, participants and regulators have had their work cut out for them keeping up with the market.

Over the past week, Robocoin Technologies announced they were expanding their Bitcoin ATM offering into Asia with planned ATM installs in Taiwan and Hong Kong.

On November 27, 2013, the Ali-cloud division of Alibaba group announced the launch of Ali Financial Cloud services.

Background

Ali financial cloud services has been developed to provide secure and stable IT resources and internet operation services for financial institutions including banks, funds, insurance companies and securities companies. The service is based on cloud computing, with the cooperation from many well-known financial product solution providers and Alipay’s standard connection portal and a completely sandboxed environment.

At current stage, China's approximately 2,000 small and medium banks are the focus of Ali Financial Cloud as these banks typically do not have enough capital and technology experience to develop their own robust IT structure, so outsourcing is thought to be a low cost and efficient way for these banks to process large amount of data and information.  

The claimed benefits Ali Financial Cloud include:

1. Enable Small and medium banks to have their own online banking system and mobile banking systems and expand e-commerce and online banking services in the rural areas.  
2. Provide stable and strong business processing capabilities for small and medium banks during high demand periods
3. Enable small and medium banks with smaller technology footprints to develop innovative products and solutions that would typically only be available to larger banks
4. Reduce IT support requirements

One example provided by Ali cloud website shows the processing capabilities of Ali cloud. About 300 million transactions of Yu’ebao could be cleared within 140 minutes, or about 35,000 transactions per second. Some financial firms are already using the Ali fianancial cloud including asset management companies, rural banks, regional banks and insurance companies.  

Historical Context

Cloud computing in China's financial services industry, similar to other global markets, has been slow to take off. Players like IBM have in the past setup comprehensive cloud computing research centers to attempt to move the market, but none have been incredibly successful in gaining a foothold. 

2014 might be the year when we see this change. Cloud technology and security has become increasingly sophisticated and with an increasing profit squeeze due to liberalising interest rates, banks will be looking for ways to increase revenue, reduce cost, and more importantly, stay innovative.

2014 - Year of the Cloud

Certainly Cloud will be a key industry topic as we move into 2014 with major players besides Alibaba including IBM, 21Vianet and Tencent all vying for a part of the increasing cloud computing pie.

It will also be interesting to see the level of innovation that happens in the space. Alibaba has rapidly moved beyond just an IT / e-commerce company to provide a variety of products and services beyond just technology. Its Yu-ebao product is forcing banks to re-think their retail investment products and how they price and distribute them – it has completely changed the industry.

With China's cloud services in the financial indusry being a key topic of discussion in 2014, could we see Alibaba do the same thing it has with 3rd Party Payment Platforms?