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Integration of Traditional and Internet Financing an Irresistible Trend that Further Strengthens China’s Financial Industry

6 minute read | April 2016

Traditional and internet financing tools will be further complementary to each other as the two continue to be integrated in the era of “big data”. China’s Internet financing business will present itself as a major force in participating international competition and cooperation in the near future, according to a new report released by Nielsen together with Boao Review and Tencent.

“It has been a controversial topic that if the internet has completely upend the market, profit and survival models of traditional finance institutions, resulting in fundamental and unpredictable influence on the whole finance industry, but undeniably the core essence of the industry won’t be changed with the development of Internet-enabled business,” says Kevin Wang, director of finance research of Nielsen China.

“For years, small business financing has been an impediment to China’s market economy. Internet financing can help small businesses and startups that do not have access to bank lending and traditional financing resources in a good way. So those emerging online finance platforms can strengthen China’s financial industry and promote its small and medium-sized businesses.”

Internet finance can raise efficiency, increase market vitality and shake off the monopoly of banks in allocating financial resources in China. In the face of challenge, the country’s traditional finance sector which includes banks, security firms, asset management companies, insurance and trust companies, has started to embrace this new trend by shifting towards internet and launching their own digital platforms.

“The rapidly ascending popularity of Internet finance poses a serious threat to the traditional financial system, forcing it to reform. Brick-and-mortar financial institutions should think innovatively to maintain their position in the industry and also allow them to develop new products and services that complement their weaknesses,” Wang says. “The extensive use of Internet technology could upgrades within the traditional financial industry. The integration of traditional and internet financing is an irresistible trend.”

Internet financing eases financing pressure for people who are hard to borrow money from banks

Due to its broad appeal and accessibility, online investment platforms are changing the way people access financial products in China. Middle and small-sized businesses, which used to have difficulties getting bank loans, are turning to Internet financing to secure funds.

According to Nielsen research, nearly 40% of those surveyed said they have experienced the rejection of a loan application by a bank. In addition, 44.2% of them believed borrowing from banks to be difficult or extremely difficult and only 13.2% of them said it wasn’t too. In total, 42.9% of the surveyed people reported feeling it was difficult to receive money from the brick-and-mortar banks.

When talking about their most recent loan application experience, those who claimed it was hard to borrow money from banks, had a23.7% successful rate. Ninety-five percent (95.4%) of those who said it was easy to borrow money from banks ultimately got what they want, indicating a huge gap between the two groups of people in bank loan application.

The internet has become a very helpful channel for those who have difficulties borrowing money from banks, with 41.9% of them claiming to have successfully received a loan from an online financing platform. As for those who can easily borrow money from banks, the majority of their loans still came from the offline channels, with only 25.4% of it are from the Internet.

There is also a big difference in interest rates between the two groups of loan appliers. When the difficult-to-finance groups receive loans from banks, 31.7% of them eventually bear 20% interest annually for loans. It’s only 3.7% of those easy-to-finance groups are required for this high burden.

But the gap is obviously narrowed when it comes to Internet loans. Although people are still required to bear at least a 10% annual interest rate, for those difficult-to- finance groups, the interest rates is not as high as that of the traditional banks. Nielsen research finds that, among the difficult-to-finance groups, 46.9% of them can enjoy the loans of annual interest rate within 8%, only 21.5% of them can get the same level of interest rate from offline channels.

Online financing changes the flow of the financing process, producing better efficiency and more equality. Apart from that, easier access is among the reasons why online financial services appeal to the public. Those who used to have difficulties getting bank loans, are turning to online financing platforms, which has become their major source of funding.

“More people are turning to online financing platforms and it’s an indicator of how social wealth is better allocated according to market rules. We are looking forward to seeing how the Internet can further solve the financing difficulty problems in the near future,” said Wang.

Internet financing have more positive effects on loan seekers

We can use “accessibility”, “availability” and “profitability”, three measures of judging the performance of offline financing, as a tool to evaluate the effect of online financing.

When the index stays at 100, it means that the impact of online financing is the same as offline. When the reading is above 100, it shows that  online financing is bringing more positive effects than that of offline to loan seekers and that online facilities are more welcome than  offline ones. When the Index is below 100, it indicates that performance by the online loans can only be rated as secondary and what the offline loans have achieved at this stage prevails.

Nielsen research shows that the index in China at present is 108.5, which demonstrates that online loans have offered more help for those seeking financing support, a signal of the initial success of Internet financing tools.  

According to this research, 49% of Chinese consumers have never applied for loans, but it doesn’t mean they have no need for funding in the future. Among those consumers, only 26.5% of individuals and 22.1% of companies haven’t encountered fund shortages. The remaining 70% have fund-raising needs although they haven’t made loan applications yet.

“With the development of Internet financing, Internet financing can offer more help to people who are difficult-to-finance by giving them access to more funding resources, in a manner that supports good risk control supporting the growth of the economy,” said Wang. “More than that, the Internet is also a good platform for the promotion and dissemination of finance management knowledge to the general public, raising public awareness of potential financial risks,” Kevin Wang said.


The report illustrates the impact of Internet finance development has on consumer behaviors and perspectives. The research covers all the provinces, autonomous regions and municipalities across China excluding Hong Kong, Macau and Taiwan, and received effective survey results of 6,478 pieces, including 4,267 personal surveys and 2,211 corporations’ surveys. After statistical processing, the sample demographics are identify with the Chinese Internet users’ backgrounds. 

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