【正文】 Future of Finance The Rise of China FinTech Mancy Sun +852 297860 72 Goldman Sachs (Asia) . Payment: The Ecosystem Gateway Fintech panies are reshaping the way Chinese consumers pay, borrow and invest. Innovators from Tencent and Ant Financial to JD and Ping An have muscled in to the financial sector and are offering everything from easier and faster ways to pay with just a swipe of a smartphone to creating attractive online saving products and loans. With consumers? financial needs unmet by traditional banking and the help of cuttingedge technology, vast new profit pools are being created. In the first of our series on The Rise of China FinTech, we focus on unique trends investors need to understand and the emergence of electronic new payment methods that have bee a crucial gateway for innovators? closedloop ecosystems. Piyush Mubayi +852 297816 77 Goldman Sachs (Asia) . Tian Lu, CFA +852 297807 48 Goldman Sachs (Asia) . Stanley Tian +852 297819 45 m Goldman Sachs (Asia) . Goldman Sachs does and seeks to do business with panies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. For Reg AC certification and other important disclosures, see the Disclosure Appendix, or go to registered/qualified as research analysts with FINRA in the . The Goldman Sachs Group, Inc. Future of Finance: The Rise of China FinTech August 7, 2017 Goldman Sachs Global Investment Research 2 Table of contents Portfolio Manager?s Summary 4 Sizing the addressable market: Untapped consumer demand 10 Key shaping trends 1: Integration 12 Key shaping trends 2: Regulation 14 Key shaping trends 3: International 17 Thirdparty payment: The current state of play 22 Key payment channels by type of transaction: B2C, C2C and B2B 28 How does it work? Traditional vs Thirdparty 30 How do they make money? Traditional vs Thirdparty 33 Enablers of growth 36 Late mover advantage in digitization of money 36 Fee structure that is closer to cash vs cards 37 Unique infrastructure setup 39 Proliferation of emerce /social platforms enables viral growth 41 Improving ease of use with technology advancement 44 Understanding the key players and petitive landscape 46 Alipay 49 Tenpay 51 Sizing the addressable market 55 Key debates for future 1: Moization 58 Key debates for future 2: Regulatory 60 Key debates for future 3: Fee petition and Mamp。A 64 Appendix 66 Disclosure Appendix 69 Contributing Authors: James Schneider, 。 Andrew Lyons。 Katsunori Tanaka。 Lara Fourman, CFA。 Frank Shi。 Tianbo Yu。 Robert D. Boroujerdi。 Shin Horie。 Philippa Vizzone, CFA。 Richard Manley。 Timothy Moe, CFA。 Andrew Tilton。 Eliot Camplisson。 Heath P. Terry, CFA。 Hugo ScottGall。 Richard Ramsden。 Jernej Omahen。 Ryan Nash, CFA。 Adam Hotchkiss。 Daniel Powel。 Thomas Wang。 Shuo Yang, 。 Elsie Cheng, Ronald Keung, CFA。 Lucy Li。 Katherine Liu。 Michelle Cheng。 Anita Yiu and Sef Chin Acronym buster: TPV: Total Payment Value, B2C: Business to Consumer, C2C: Consumer to Consumer, B2B: Business to Business, QR code: Quick Response code, POS: Point of Sale This is the latest report from our Future of Finance series, where we explore how Tech is changing the shape of Finance. See related reports below or visit our GS360 portal for the full coverage: Payment Ecosystems, Aug 4, 2017 The socialization of finance, Mar 13, 20xx Redefining the `Way We Pay? in the Next Decade, Mar 10, 20xx Watch a video summary from the author here August 7, 2017 China: Technology Goldman Sachs Global Investment Research 3 28 China FinTech in numbers THIRDPARTY PAYMENT GROWTH $155bn $ Thirdparty payment value in China grew more than 74X from 20xx to 20xx. About 16% of that is consumption related. 56% is peertopeer transfer. (p. 2229) INTEGRATION MINDSET INTERNET LENDING $4bn $156bn Total inter loan balance outstanding in China grew more than 36X from 20xx to 20xx. But in context it is small pared to China?s gigantic financial system, at only % of total social financing. (p. 13) PRIVATE CAPITAL OWNING INFRASTRUCTURE 95 Alibaba mentioned the word ?ecosystem? 95 times in Private panies (nonstate owned) own 60% of the new centralized clearinghouse for online payments. 60% their 20xx annual report. Similar mentions are observed from other leading FinTech players Ping An, Tencent, JD, Baidu etc. For context, ICBC mentioned the word ?FinTech? or ?Inter? 22 times. (p. 13) The largest shareholders besides the Central Bank and the State Administration of Foreign Exchange are Ant Financial (%) and Tencent (%). This pares to China?s existing basic infrastructure, which are stateowned. (p. 16) INTERNATIONAL EXPANSION PAY WITH YOUR PHONE Chinese consumers can use their favorite thirdparty payment method outside of China at physical retailers in 28 countries and regions. (Alipay: 28。 Tenpay: 15). (p. 18) Thirdparty payment done via mobile devices account for 75% of the total payment value. For context, 20% of the US e merce payment is via mobile devices. (p. 23) 75% CASHLESS TRANSACTION SIZE 40% Retail consumption paid via third