China's younger retail investors are increasingly patronizing online wealth management products to fill in a gap in financial services brought about by a decreasing number of traditional banks and stock markets.
According to a report by 51 Credit, a fintech company, people between ages 21 and 30 account for more than half of its 70 million users. Way back in 2015, it was reported that online wealth management products are attracting numerous small Chinese investors.
Online wealth products have become more accessible to the young generation--the main Internet users--after the market lowered the bar for interested investors, said Neil Wang, president for Greater China market of Frost & Sullivan, a global researching and consulting company.
The said report noted that younger people find online wealth management products a more affordable alternative investment than stock markets and real estate. Youthful investors are also attracted by the safe and convenient way of investing and the rewards they could receive over the short term.
While the wealth management products of banks provide higher interest rates, younger investors are discouraged by the high investment requirement of a minimum of at least 50,000 yuan, said Wu Jiali, a bank account manager.
On the other hand, some online products could be availed for as little as 1 yuan.
Ease is also a factor, as users are able to manage their investment through the Internet, while banks implement strict working hours in their branches and even for their online services.
Around half of 51 Credit's products range from 10,000 yuan to 100,000 yuan, with the average investment at 45,700 yuan.
Another factor that made online wealth management products more attractive is their variety. This allows profits to accumulate from as long as many years to less than a month, giving users more flexibility on their assets.
New regulations implemented by the Chinese government on online financial services have also created a sense of security among investors. It specifies that clients funds must be placed at established banks and that online financing platforms give better disclosure on the state of the investments while providing regular warnings about the risks of investing online.
The regulations also mandated that China's central bank oversee the payments online while the China Banking Regulatory Commission will supervise online lending and peer-to-peer platforms. Meanwhile, the China Securities Regulatory Commission was tapped to take control of crowdfunding and online sales of funds.
In a survey, 11.5 percent of Chinese expressed willingness to invest in online wealth management products.