China's fintech revolution is potentially 'a very big risk,' says finance president

Key Points
  • The sheer number of fintech firms setting up in China has the potential to become "a very big risk," according to the president of financial investment platform Phoenix Finance.
  • Speaking at CNBC’s East Tech West conference in the Nansha district of Guangzhou, China, Vince Zhang said many of the country's financial technology firms lack the controls necessary.
Vince Zhang, President of Phoenix Finance, speaks during Fireside Chat on Day 3 of CNBC East Tech West on November 29, 2018 in Nansha, Guangzhou, China.
Dave Zhong | Getty Images Entertainment | Getty Images

The sheer number of fintech companies setting up in China has the potential to become "a very big risk," according to the president of Chinese financial investment platform, Phoenix Finance.

Speaking at CNBC's East Tech West conference in the Nansha district of Guangzhou, China, Vince Zhang said many of the country's estimated tens of thousands of financial technology firms lack the controls to make them sound instruments, either for consumers or the wider economy.

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"A lot of companies are not (there) in terms of their business plan, in terms of their risk management process, in terms of their overall management," told the Financial Times' Louise Lucas Thursday. "A lot of these corporate control mechanisms are not in place."

In recent years, China has seen a surge in the number of companies trying to harness technology to capitalize on what Zhang described as China's "fintech revolution" and capture the country's many millions of previously unbanked consumers. For other industries, that technological drive may be "okay," said Zhang; but "for anything related to financial services, (it) is pretty dangerous," he said.

"Without proper risk control mechanism personnel, without proper ways of communicating with regulation, it's potentially becoming a very big risk going forward."

Zhang called for more regulation in the space, particularly with regard to consumer protection and risk control. He says he foresees that taking shape from next year, as the issue gains greater prominence on the national agenda.

"I would predict in 2019 it's becoming more regulated," said Zhang. "There will be less and less players in this field."