5 minute read 17 Dec 2018
China aerial view

How China’s open banking experiment is unfolding

Open banking is thriving in China, driven by an innovation-focused economy and the world’s most digitally connected consumers.

This article is part of our Open Banking Opportunity Index.

EY's Open Banking Opportunity Index offers a view across ten markets, revealing insights into the indicators for open banking to thrive in one country and lagging in another. One of the most interesting findings is that the Index’s top two ranked countries – the UK and China – share strong consumer adoption potential and innovation environments, but differ significantly in terms of the regulation that underpins open banking.

And while it’s widely acknowledged that the UK’s approach is the global benchmark in our Index, China’s less regulated approach has yielded results that have defied many expectations.

Open banking opportunity index ranking  - Mainland China info graph

In China, the lightning-fast development of open banking reflects the rapid growth of the internet and smartphone, which are now central to everyday life for Chinese consumers. The internet has enabled the creation of direct banking, which allows consumers to set up online accounts to access banking services without ever setting foot in a branch. Direct banking was adopted by both traditional banks and a host of new startups with no physical branches – there are now more than 3,000 banks in China.

As direct banking grew, banks leveraged application program interfaces (APIs) to expand their customer service coverage, offering financial services across other lifestyle services such as e-commerce and creating a vast ecosystem of products across sectors. Now China’s banks are using their open banking portals to redefine their entire role, positioning themselves not just as financial institutions but as technology companies and lifestyle partners for customers. 

Until recently, much of the growth in China’s open banking has occurred in the absence of any mandates, API standards or regulatory protection of customer data. But this is changing, with Chinese regulators cracking down on the questionable practices of some peer-to-peer (P2P) lenders and cryptocurrency traders. 

China’s approach to regulation, both in the financial sector and beyond, is best described as pragmatic and organic – allowing industries to develop through experimentation and stepping in to tackle problems as they appear. The Government is treading carefully, anxious not to slow down innovation, but instead establishing frameworks that support its growth in a manner that offers greater protection to consumers. 

China reportedly will introduce regulation that mirrors that of Europe’s General Data Protection Regulation (GDPR), though timing of any implementation is unclear. It is expected that regulation of China’s open banking sector will continue to unfold as the country considers its evolution in other markets. 

The world's most connected consumers 

A laissez-faire approach to regulation may have allowed the expansion of open banking in China, but demand from China’s fast-expanding, digitally connected middle class is the biggest driver for its success. Today’s typical Chinese consumer carries no cash, or even cards, preferring to transact via mobile banking, which has taken off faster in China than anywhere else in the world.

Consumer adoption


of China’s smartphone users have adopted mobile banking apps, more than any other country in our index.

This high digital adoption rate is encouraged by Chinese consumers’ willingness to share data with institutions. Unlike banking customers in many western economies, our consumer sentiment research indicates that consumers in China were more positive and happy to share their transactional data with FinTechs. Roughly half of the online discussions about open banking were positive, focusing on its benefits of innovation and new services.

FinTech services


of the digitally active population uses two or more FinTech services.

Consumer sentiments insights: China vs. Global

Chinese consumers are happy to swap data for services

While Chinese attitudes to data security may be, in large part, explained by cultural norms, it’s clear too that consumers perceive big payoffs for sharing information. The pace of Chinese progress in creating innovative products and services, including in financial services, is dizzying, with China rating second only to the US in terms of innovation in our Index. 

Regulation, trust and consumer sentiment info graph

In the past, this innovation may have been largely derivative of that seen in Western economies, but no more. A vibrant homegrown innovation culture is thriving, with young entrepreneurs inspired by the success of tech magnates (such as Alibaba founder Jack Ma) to create products and services specifically geared to the Chinese consumer. In 2017, China registered more FinTech patents (171) than any other country.

Can regulators balance security with speed of innovation? 

How will open banking in China evolve? The country’s financial sector is at a crossroad. Regulators face critical decisions about how to put in place the frameworks that support a sustainable, secure sector while still allowing firms to innovate at the breakneck speed demanded by consumers.

China’s open banking experiment has seen innovation thrive and consumer adoption accelerate faster than anywhere else in the world.
Effie Xin
Principal and EY Financial Services Greater China Consulting Leader.

Designing effective policy will best be done in collaboration with the industry and enhanced by regulators themselves. Together, they will embrace technology and digital tools to help shape specific regulatory regimes for China’s different regions. 

For FinTechs and TechFins, increased regulatory scrutiny highlights the need to establish a strong reputation in the market, perhaps through partnerships. Firms that embed themselves into the fabric of China’s expanding financial ecosystem stand a better chance of surviving its fierce competition. Collaboration with traditional banks can deliver benefits both ways – helping FinTechs build trust while bolstering the innovation quotient of the incumbents. 

As China progresses with open banking, it may take notes from more balanced regulatory regimes in the region, such as that of Singapore and Hong Kong SAR.  But equally, more established markets could do well to learn lessons from China’s open banking “experiment” where agility, speed to scale (and sometimes fail) and the use of customer data to drive innovation is leading the world in customer adoption. 

Author contribution by Effie Xin, Principal and EY Financial Services Greater China Consulting Leader.

  • About the EY Open Banking Opportunity Index

    The EY Open Banking Opportunity Index (pdf) assesses the conduciveness of open banking to thrive across 10 selected markets. Success is viewed as the potential for consumers to adopt open banking-enabled services within a market.

    Our model uses a wide range of measures — 22 indicators and 13 sub-indicators — to assess each country’s potential, across four key conditions needed for the success of open banking: regulatory environment; adoption potential; consumer sentiment; and innovation environment.


Through innovation open banking has accelerated faster than anywhere else in the world, however, China now sits at a critical crossroad as regulators adopt stronger policy frameworks.

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