A teller serves a customer at a bank in Shanghai. Efforts to reach a large population that lacks access to financial services are helping to fuel the explosive growth of fintech in China. AFP

When it comes to financial technology, or fintech, China is a world leader in every aspect. The country has taken some of the largest chunks of global investment in the sector and is adopting the technology faster than anywhere else.

"China is the home of fintech innovation and adoption," says James Lloyd, Asia-Pacific fintech leader with consultancy EY, during Finnovasia 2016, a fintech event held in Hong Kong in late May.

"During an event in Shanghai, interestingly, a (chief financial officer) of a Chinese fintech unicorn I met said fintech is basically a Chinese phenomenon," he adds.

Unicorns are very successful startup companies valued at more than $1 billion. Fintech unicorns are rare but they are showing up in China.

In April, private company Ant Financial Services Group, which owns and operates the country's largest online payment platform by transaction volume, Alipay, raised a record-breaking $4.5 billion in funding.

This series B round was led by China's sovereign wealth fund China Investment Corp and State-owned China Construction Bank. Companies use series B funding rounds to attract investors, bypass the development stage and expand their market reach.

"If you look at China, it's streets ahead on the fintech side," says Lloyd, when compared to Europe and the US.

Banking and financial services are expanding throughout China as service providers strive to reach a large population that is unbanked — lacking access to financial services — and provide them with savings accounts, insurance and pensions. Such efforts are helping to drive the explosive growth of fintech in the country.

In contrast, the adoption of fintech in the West has not been as rapid, even though a reasonable level of product development exists and financial products are generally widely available.

"While innovation and fintech is ‘cool' in the US and Europe, it's actually hardcore in China," says Lloyd.

"The unmet needs are simply great, by virtue of a banking system that is traditionally focused on corporates, by virtue of the absence of financial services that we, in Hong Kong, might take for granted."

Lloyd adds that whether that relates to credit cards, investment products or savings accounts, the absence of these products is really the root of innovation in China.

In the first quarter of this year, fintech companies in China attracted $2.4 billion from venture capital firms in nine deals. This accounts for 49 percent of the $4.98 billion in investment in the space recorded globally.

Raymond Cheong, a partner with accounting firm KPMG China, notes the growing global and domestic interest in China's fintech ecosystem.

"With innovation occurring across a number of sectors, consumers are increasingly looking to avail of technology and liquidity within the China (venture capital) community. This creates a perfect storm in terms of achieving these high levels of fintech investments," Cheong says in a note.

The lack of financial infrastructure is the driving force behind fintech innovation.

Large tech players focusing on financial services have taken up the majority of the market share. These include Alibaba, Tencent and Baidu, all of which are at the core of China's fintech revolution.

These three companies control the largest e-commerce platforms and own major companies in the fintech wave in China. Tencent-backed WeBank, for example, is the country's first purely online bank.

Despite the exciting outlook, the growth of China's fintech industry has not been smooth nor is it likely to be. The evolving regulatory environment is seen as a hurdle to some investors.

In July 2015, authorities unveiled the Guidance on Promoting the Healthy Development of Internet Finance document after a series of scandals in peer-to-peer lending companies came to light.

"The funding and progress in Chinese fintech has been remarkable. It is clear that there is significant future growth potential," says Zennon Kapron, cofounder and director of Shanghai-based China FinTech, a company that works with startups, financial institutions and investors.

"The real question is how fast the regulators will let it grow as they seek to balance innovation and progress with potential risk, which is still very unclear."

China may be leading the way in fintech innovation, but developed markets in Asia such as Singapore, South Korea and Japan are also promoting fintech, albeit for different reasons.

While China has a clear need for financial services, more developed economies rely on fintech for innovation within their financial services industries.

Generally, Asian companies' interest in fintech continues to be strong, with more than 30 percent of deals seeing corporate participation. It is primarily driven by banking institutions that have already made investments in the space by acquiring fintech companies, forming partnerships or setting up innovation programs.

Singapore is also taking steps to ride the wave of innovation in fintech. Some of its government-backed projects are partnerships between Standard Chartered Bank and DBS using blockchain technology for financial transactions. Blockchain allows parties to carry out direct transactions without using an intermediary.

Still, the fintech revolution in China is remarkable in Asia Pacific simply due to its sheer volume, size and the vast potential of the country's unbanked population.

Lloyd from EY says: "Hong Kong, Shenzhen and Guangzhou have about 60 million people. That's already pretty world class in terms of possibilities and potential from a domestic market perspective."

These cities have a larger population than Singapore and South Korea combined and are China's rising stars in the fintech firmament.

Also speaking at Finnovasia 2016, Jin Pang, chief marketing officer of the Shanghai-based fintech company Dianrong, noted the potential China can unlock because the market is still so immature.

"The sort of innovation that is happening in China is much more sophisticated than the developed market and there is no border when it comes to financial innovation," Jin said.