Innovation is no longer orchestrated by regulatory agencies and merely implemented by financial institutions (top-down), as it was during the first stage; nor is it driven by technology companies (bottom-up), as it was during the second stage. Current innovation dynamics reflect a complex interplay of collaboration and competition between traditional service providers, big tech firms that have moved into financial services, independent FinTechs and regulators. As these players continue to find their places and roles in the newly emerging business environment, the future make-up and characteristics of China’s financial industry remain to be determined.

The approaches chosen by China’s financial regulators will be decisive in setting the future direction. FinTechs managed to grow faster and influence the interaction between individuals and service providers more deeply in China than in most other jurisdictions. The industry’s success enabled hundreds of millions of individuals who were previously underserved by traditional institutions to access financial products. It also greatly enhanced user experience and operating efficiency and reduced transaction costs. The industry was able to deliver these benefits because Chinese regulators took a “wait and see” attitude during the early stages of its development that allowed innovation outside the traditional regulatory perimeters to blossom, and then adjusted rulebooks only over time in a process of “regulatory catch-up”.