Industry Insights | Financial literacy education is on the rise, and diversified business models hold great promise

Over the past decade, as our economy has shifted towards high-quality development, it has maintained a reasonable growth pace while achieving a qualitative and steady improvement through continuous innovation and progress in new economic sectors such as the internet, the steady development of the real economy, and comprehensive macroeconomic regulation measures.

The total economic volume has continuously reached new heights. In 2021, China's GDP exceeded the 110 trillion yuan mark, contributing an average of 38.6% to global economic growth, becoming a key driving force for world economic expansion. At the same time, economic development is shifting from quantity to quality. In 2021, China's digital economy reached 45.5 trillion yuan, accounting for 39.8% of GDP, becoming a key force supporting high-quality economic development.

While China's economic strength continues to reach new heights, the quality of life for residents is also constantly improving. By 2021, the per capita disposable income had reached 35,128 yuan, doubling the per capita disposable income in ten years. At the same time, the total amount of family wealth management in China reached 77.6 trillion yuan in 2021, with an annual compound growth rate of nearly 20% over ten years. Therefore, it is not difficult to observe that while China's macroeconomy is developing strongly, the total amount of family wealth management also shows a steady growth trend.

Although China's macroeconomy and household wealth have achieved rapid development in the past, the overall national financial literacy rate still has room for improvement compared to developed countries.

It is undeniable that the overall financial literacy of our nation's citizens is continuously improving. According to the research results of the People's Bank of China on consumer financial literacy in our country, the consumer financial literacy index is 66.81, an increase of 2.04 compared to 2019, from four aspects: consumer financial knowledge, financial behavior, financial skills, and financial attitude.

Overall, the national sentiment towards finance is positive. Compared to 2019, the importance placed by nationals on receiving financial literacy education has increased.The proportion of people who believe that financial literacy education is very important increased by 14.04%, while the proportion that believes it is not important dropped by nearly 10 percentage points.

However, there are significant differences among nationals in various aspects of financial behavior and skills. There is still room for further improvement in financial knowledge. Nationals lack sufficient understanding of basic financial common sense such as diversified investment, and their expectations for financial investment returns exhibit irrational characteristics, making them prone to irrational investment behaviors. Therefore, in the medium to long term, there is still considerable room for improvement in the financial literacy of Chinese nationals.

Financial literacy education refers to educational activities that help individuals improve their financial knowledge and skills, assisting them in better resisting the impact of income and expenditure changes and achieving personal financial goals. Online financial literacy courses are learning programs that primarily enhance an individual's financial literacy through online courses. In terms of course setup, they mainly follow a ladder-like progression from easy to difficult, mainly divided into introductory courses, advanced courses, and advanced advanced courses.

Among them, the introductory course is also known as the traffic-driving course.The courses are mainly provided at low prices or for free to 'beginners'. By placing advertisements on various social media platforms, we aim to stimulate the financial literacy learning awareness of a wide range of people, turning them into interested individuals. This helps them establish good financial attitudes and behaviors, while laying a foundation for the conversion of our subsequent advanced courses and high-level courses towards more targeted customer groups.

Advanced CourseIt mainly provides financial thematic learning for individuals in specific areas such as stocks, funds, bonds, and insurance. The aim is to help individuals improve their financial knowledge and skills in these areas. The price per advanced course is usually within 1,000 yuan. The main target groups include 'full-time moms' who want to manage their family wealth well, 'working professionals' who want to earn extra income beyond their salary, as well as 'debtors', 'moonlighters', and other individuals with significant financial management needs.

Advanced CourseBased on advanced courses, this provides more theoretical and practical enhancement courses for individuals who already have a certain foundation in finance. The average transaction price is usually around a thousand yuan. The main target groups include those with some investment experience but who often suffer losses or want to achieve higher returns, those interested in advanced financial knowledge theory, as well as individuals within families who hold financial power and are responsible for family financial planning.

In terms of the teaching methods of financial literacy courses, they mainly include video live streaming, video recorded sessions, audio, images and texts, as well as community sharing. Typically, courses in video recorded sessions, audio and images are more convenient for working professionals with variable study times. Individuals can flexibly study during fragmented time according to their own schedules, and they are also cheaper compared to courses delivered through video live streaming and community sharing.

However, in terms of course interactivity and experience, video live streaming and community sharing courses have more advantages. Moreover, since advanced and high-level courses, which typically have higher unit prices, often use video live streaming and community sharing formats, individuals achieve a higher completion rate of their courses, which is also more helpful for improving their personal skills.

Compared with developed countries, China's financial literacy education started relatively late. The State Council only mentioned in 2013 in the 'Opinions on Further Strengthening the Protection of the Legitimate Rights and Interests of Small and Medium Investors in the Capital Market' that investor education should be gradually incorporated into the national education system. The leading online financial literacy education service providers in China were truly established around 2017, while developed countries represented by the United States, the United Kingdom, and Japan began incorporating financial literacy education into their national education systems in 1994, 2000, and 2005, respectively.

China's online financial literacy education market is in the initial stage of rapid development.In terms of revenue, the online financial literacy education market in China grew from 6.5 billion yuan in 2017 to 7.9 billion yuan in 2021, with a compound annual growth rate of 5% from 2017 to 2021. It is expected to grow to 18.8 billion yuan by 2026, with a compound annual growth rate of 18.9% from 2021 to 2026.

From the perspective of demand-side logic driving market growth,With the positive development of China's macroeconomic environment and financial market, the per capita disposable income of residents and the total amount of household asset management have been continuously increasing. Residents' demand for financial literacy education to better meet their financial goals is also on the rise. The willingness of residents to pay for financial literacy courses has been growing, which has jointly promoted the development of China's online financial literacy education market.

From the perspective of the supply-side logic,The huge market demand has also given rise to a number of enterprises related to financial literacy education. Although the number of enterprises providing financial literacy education has decreased under regulatory influence, there were still about 7,000 enterprises offering financial literacy course services by the end of 2021. In addition, thanks to the development of mobile internet, the development of online education in our country has broken through the limitations of traditional offline education due to insufficient geographical coverage and teaching staff. With the development of emerging technologies such as cloud computing and artificial intelligence, online financial courses provide individuals with a smoother and more efficient learning experience, continuously optimizing market development from the supply side and promoting the more sustainable development of China's online financial literacy education market.

After experiencing a rapid development cycle in the online financial literacy education market, leading online financial literacy education providers are also actively exploring other development opportunities centered around financial literacy education, seeking a second growth curve for future development.Currently, the main revenue-generating models in the market include three categories: channel fees for securities account opening to new clients charged by securities firms, commission fees for selling insurance and fund products on behalf of clients, and service fees for investment advisory services.

Before the release of the 'Securities Brokerage Business Management Measures', leading financial education providers would recommend account opening to students after they have completed introductory or advanced courses or possess a certain foundation in financial knowledge, reducing the cumbersome process of users having to find additional securities companies to open accounts. At the same time, financial education providers receive commissions from brokers as a reward for their recommendations.

However, with the implementation of the 'Securities Economic Business Management Measures' in January this year, it has been clearly defined that securities brokerage business refers to 'conducting securities trading marketing, accepting investors' commissions to open accounts, processing trading instructions, handling settlement and delivery, and other operational activities'. It is also stipulated that 'securities companies engaged in securities brokerage business may choose third-party carriers such as news media or internet information platforms to place advertisements. Any link of securities business such as investor solicitation or acceptance of trading instructions must be independently completed by the securities company, and third-party carriers shall not intervene'. Therefore, in the future, online education providers will find alternative development paths by promoting revenue-generating models for opening securities accounts.

Online financial education providers with qualified insurance brokerage and fund sales licenses will recommend suitable insurance and fund products to students after they have completed certain introductory and advanced courses. This helps students improve their asset allocation, enhance their risk resistance capabilities, and diversify their own receivables structure.

The promotion of securities account opening and the sales agency for insurance and fund products essentially act as a bridge between financial institutions and users. However, due to the strong regulatory nature of financial services, compliance with regulations has become a key issue.While holding relevant qualified financial licenses, online financial education providers need to continuously improve their promotional language under their operational systems, reduce non-compliant behaviors by sales staff, and strengthen content capabilities to avoid negative impacts on the brand caused by violations.

In addition to the two channels mentioned above for students to open and purchase securities accounts and fund and insurance products, leading online financial education providers with a securities investment consulting business license can also carry out related securities investment consulting services around the investment advisor business.

The so-called securities investment consulting business refers to the activities where institutions and their consultants with relevant qualifications provide investors with information, analysis, prediction, or advice on securities investment, and directly or indirectly collect service fees. Specifically, it involves providing users with investment advice such as buying or selling investments, stock trading software, and other investment advisory or education products.

Currently, there are 80 institutions in China that hold securities investment consulting licenses, mainly including securities companies, brokerage research institutes, financial software providers, financial information providers, investment consulting firms, etc. Since no new separate licenses have been issued since 2014, the existing licenses in the market have become a scarce resource.

Overall, with the further improvement of China's demand for financial literacy education and the diversified development opportunities in this field, online financial literacy education in China will embrace broader development prospects.