【正文】 rid tech/finance panies have started to dominate the space. By contrast, panies in the West have typically concentrated on one or just a few particular core business lines (such as Visa and MasterCard, or disruptors like PayPal and Lending Club). (p. 12 13) 2. Private capital started to own (at least part of) the next generation of financial infrastructure, while historically most of China?s existing basic infrastructures are owned by the government. For instance, Ant Financial and Tencent each owns % of Wanglian (China?s new centralized clearing house for all online payment). They are the third largest shareholders, just after the Central Bank and the State Administration of Foreign Exchange (34% bined). (p. 16) 3. Thirdparty payments in China are replacing cash, not only bank cards, and are widely in small ticketsized and high frequency transactions. This is starkly different from most developed world where one of the most persistent uses of cash remains the purchase of small ticket items. We estimate that about 40% of the retail consumption in 20xx was done via thirdparty payments. (p. 2324) 4. Chinese consumers are not only embracing thirdparty payments at home, but have also taken their favorite payment method abroad. Thirdparty payments are available at physical retailers in at least 28 countries for Chinese travelers. They can even have VAT (valueadded tax) refunded directly to their ewallet on the same day when they travel abroad (at most EU airports and Korean airports). (p. 18) 5. QR codes, the twodimensional barcode that never really took off in the West, dominates the daily payment scene of the Chinese way of life. It has made significant progress abroad too, as according to the SCMP, EMVco (“a consortium of smart payments collectively owned by American Express, Visa, MasterCard and UnionPay”, adopts it as an industry standard of payment format in July 2017. (p. 2425) 6. An average Chinese consumer has debit cards, but only 1 out of 3 of them has a credit card. The low credit card peration but extremely high debit ca rd peration sets a unique stage for digital payment to grow. (p. 39) 7. 16% of the US$ thirdparty payment value (TPV) is consumptionrelated – that is the major direct fee contributor for payment panies, when pared with C2C transactions (56% of the TPV but usually free of charge). (p. 29) 8. Thirdparty payment fees are much lower in China vs most other countries. For instance, Alipay/Tenpay charges a merchant 3860bps for receiving money from a customer, while PayPal charges 290bps + US$. (p. 38) 9. The spread for a typical thirdparty payment processor is %% per transaction. For context, PayPal?s spread is % in 20xx. The direct profit from payment processing is thin, unless the payment panies have other channels for moization within their ecosystem. (p. 33) 10. There have been at least 40 Mamp。 Katherine Liu。 Jernej Omahen。 Philippa Vizzone, CFA。A 64 Appendix 66 Disclosure Appendix 69 Contributing Authors: James Schneider, 。 Tianbo Yu。 Heath P. Terry, CFA。 Shuo Yang, 。 See our case study on page 20. Our takeaways for thirdparty payment Enablers of growth: The bination of 1) technology 2) digitization of money 3) low fees 4) unique infrastructure setup 5) proliferation of emerce and social platform allowed China to leapfrog from cash to cashless, or even cardless transactions. The addressable market is large and the share is shifting rapidly. New technology is also expanding the pie in markets that were historically underperated by banks. $11bn annual consumptionrelated revenue/fees pool to be created by 2020E: Immediate revenue opportunities e from B2C payments, which is just a small portion of the overall payment value. Moization initiatives for other transactions (mainly C2C) are still in the early stages. Direct profitability might not be the big players? top priority, as payment is often viewed as the gateway for their integration. Disruptors and petitive landscape: 40% of the retail consumption today in China is done via thirdparty payments. Alipay and Tenpay now dominate the space with 84% market share, but sizeable players from other industries are joining the race. Key debates for future 1. Moization: Direct profits from payment are thin in China, due to low fees, high petition and marketing spending. However, payment serves as a key infrastructure for the big players? ecosystem by granting targeted access to users, and profitability remains secondary. Future moization will likely e from targeted advertising, consumer financing and wealth management. 2. Regulation: There is an increasing need for regulators to monitor the money flow via the closed FinTech ecosystems and payment is the starting point. However, instead of simply banning this activity, regulators are working with the payment panies as that?s where the technology knowhow lies. This creates unique access for private capital in the next generation of financial infrastructure. 3. Fee petition/Mamp。 and 2) ArtificialIntelligencebased (AIbased) investing advisory services. Incumbent asset managers have also been investing/acquiring AIbased service and expanding online distribution channels and we still see great uncertainty around final investing market structure. Future of Finance: The Rise of China FinTech August 7, 2017 Goldman Sachs Global Investment Research 11 Increase in noncash transactions 20xx 20xx Exhibit 2: We expect China?s digitization of money by 2020E to reach a similar level of US in 20xx. Exhibit 3: We estimate the consumptionrelated third party payment value to reach by 2020E. Share of noncash transactions as a % of total transactions in 20xx (xaxis) vs。As in the payment space, as players i