Enter the dragon: how Fintech is helping exporters to China

The Chinese financial landscape is dominated by homegrown technology giants. Innovative products like WeChat Pay, Alipay, and Baidu Wallet have revolutionised how financial services are delivered in China and are valued at a combined $1 trillion.

However, Western fintech brands remain mostly absent from the Chinese market. These companies have regarded China as a peripheral market because of regulatory constraints and high barriers to entry for non-Chinese financial services providers.

But China is evolving quickly, and Western Fintechs are building a presence in the country. And these innovators are providing a range of new products that make it easier for exporters to succeed in the world's most populous market.

One area Western Fintechs are impacting is foreign exchange. It's an area ripe for disruption: the World Bank cites China as one of the world's most expensive currency exchange corridors.

Fintech FX disruptors are now a significant force in the Chinese market. Take TransferWise, for example. A well-known brand in Europe, Australasia and the US, the company employs an automated matching system to pair transactions between, say, yuan and sterling, with money moving in the other direction. It's making waves by providing businesses with superior rates compared to traditional brokers — it claims to reduce fees for China down from almost 10 percent to 1.5 percent and cut days of delivery time.

Another disrupter is WhichFX, a platform that pits brokers against each other. Its solution is simple but powerful: corporates using the solution request a quote to the network of brokers, who then have 15 minutes to reply with their best offer. In theory, this approach lowers the spread, taking it closer to the interbank rate, and the model excludes commission fees, making price comparison easier.

China remains an unfamiliar territory for many Western companies. This creates numerous risks for businesses to manage. Most notably, it's hard for Western companies to often know exactly who they are doing business with and their creditworthiness. Late payments and non-payments are a big risk for all companies operating in China. Fortunately, a cohort of Fintechs operating across these areas is making it easier to manage these risks.

For example, MarketInvoice is a specialist in lending and contract-secured finance known as invoice finance. It offers these services to UK SMEs owed money by Chinese buyers, which is not an easy market to include. "We use a number of third-party services to credit check," says Craig Flyger of MarketInvoice. "In addition, we can use contacts such as the Department for International Trade, to assess the reputation of Chinese buyers."

The service means Western exporters can access a familiar service, which has Chinese-language speaking support, with experience in supporting UK companies exporting to China.

"Exporters see China as a daunting market," explains Flyger. "Things like the language barrier, access to information, and doing due diligence on partners, makes it hard. We can in part help exporters. Send your goods to China, if your invoices have long payment terms, we can dive in and help manage your cashflow."

Given China's status as the world's largest trading nation and its cruciality to many supply chains, businesses are interested in any solution that makes it easier to trade with counterparties in the country. Because of this, Tradeshift, the leader in supply chain payments and marketplaces, is another Fintech growing strong in the country.

By using Tradeshift, exporters can access the Chinese market on a familiar platform and connect with buyers and suppliers via the platform's audited and regulated network. Tradeshift lets all registered parties trade via a cloud system. Businesses can settle invoices instantly, if necessary. And the supply chain and finance are completely digital. Gone are manual processes of paper invoices, PDFs, Excel, and other financial and supply chain documents.

Third-party applications enhance Tradeshift's proposition for exporters, in a manner similar to Salesforce AppExchange. There are currently over 230 apps available, including a partnership with Chinese peer-to-peer lender CreditEase and French credit insurer Coface. These allow exporters to manage all their processes digitally from a single platform. For example, with Coface, users can quickly assess and actively monitor the creditworthiness of a Chinese buyer.

"Through our platform, we connect multinational companies with their suppliers and customers in China," says Mikkel Hippe Brun, senior vice-president APAC for Tradeshift. "Doing business in China can be challenging for foreign companies. There are big technical, cultural and financial barriers for companies trying to enter the market. We wrap a complex set of national requirements into a simple product that can be sold as a service at a low cost. It is by the scale of our operation that we can help drive down the cost of doing business."

China is the most alluring export market on earth and can increase sales by orders of magnitude for any business. And now Fintech is set to lubricate the wheels of commerce for all entrants into the Chinese market, making it accessible for all.