China: Embracing Informality

About the Project

Reboot undertook this study with the support of the Institute of Money, Technology, and Financial Inclusion to develop a deep understanding of the daily lives of China’s marginalized. We focused our work through the lens of financial inclusion, with the goal of informing the development of new financial services that will vastly increase these populations’ access to economic opportunity and security.

Hundreds of millions of migrant workers have flocked to Chinese metropolises in search of opportunity.

But, financial access has not kept pace with an increasingly transient population. Citizens at the bottom of the economic pyramid lack even the most basic means to save for their children’s education, make purchases on credit, protect their homes through insurance, and send and receive money.

Financial exclusion prevents many of them from realizing their potential and improving their livelihoods.

Approximately 40 percent of the world’s population––2.7 billion people––are unbanked. Despite widespread efforts to bring banking to these billions, many new financial products have found uneven success, especially among marginalized populations who need them most. Often service providers create new offerings with a narrow focus on feature set, cost, or market opportunity, without consideration of how to adequately address the needs of the populations they seek to serve.


China is a powerful case study of the challenges inherent in designing financial products for unbanked populations. We uncovered that three key findings are crucial for any service provider interested in serving this market:

1. Build on informal services

Marginalized populations meet their needs through networks of informal services facilitated by social connections. People often prefer informal services because of convenience, ease of use, and trust. Service providers should aim to complement— not compete with—existing informal services.

2. Leverage existing social connections

While once a network of walled cities, China is now a web of tethered networks. Service providers seeking to accommodate these populations must focus on the human networks that connect them.

3. Meet people’s everyday needs

For those with limited economic means, stable services are critical. Service providers must understand that they run the chance of deeply undermining the lives of those already most marginalized. Providers must actually deliver the stability they promise.



By understanding the lives of China’s poor in the rapidly changing economy, and by designing services that align with existing behaviors and networks, we can help lift millions of Chinese citizens into stability.
The Chinese market is primed for the deployment of a mobile-based remittance system with potential applications for both peer-to-peer and business-to-consumer usage models.
We designed M-Fu, a hypothetical prototype of a financial product, to spark discussion and to illustrate how the above concepts might be operationalized. M-Fu (Fu meaning “to pay” or “to deliver” or “to entrust”) offers an easy and secure way to send and receive money.

How it works.

M-Fu leverages existing networks of laobans (bosses) and their workers. To build a user base, laobans act as agents and receive a small commission for every worker they sign up.

The money is then transferred through a government-regulated network that alerts the recipient of new funds via SMS. Finally, the recipient can collect the funds at M-Fu agent locations, based out of mom-and-pop stores in rural villages nationwide.
This figure demonstrates the market potential of this hypothetical service.