Category: 3. Business

Imagine being unable to get a loan, pay an urgent medical bill or secure your new family home with a rental down-payment.  Why?  All because you lack access to the kind of modern-day financial tools which much of the developed world takes for granted.

You are, to use that quietly damning word, unbanked.

Financial exclusion isn’t confined to the world’s poorest people.  It is widespread.  It is overlooked.  And it is a notoriously difficult trap from which to escape.

Altogether, around a quarter of the world’s adult population – an estimated 1.4 billion people – do not have access to a bank account or appropriate alternative such as a building society or credit union.[1]  A further half of adults qualify as ‘underbanked’, relying solely on cash and lacking any avenues of credit.[2]

In today’s hyper-connected world, breaking out of the poverty cycle means having digital access to your finances.  Likewise, it demands access to the suite of systems many of us in mature markets already use to receive wages, pay invoices, source credit cards, earn interest, and insure our homes and businesses.

In the absence of these facilities, those affected are likely to endure a form of second-class citizenhood.

Financial exclusion is particularly pernicious because it often leads to inequality and injustice.  Of those 1.4 billion financially excluded adults, around 80% live in emerging markets on the frontline of the existential battle against climate change.[3]  Already these societies are facing an uncertain future and struggling to implement long-term plans as climate disasters such as floods, droughts and heatwaves derail economic development.  Green energy, climate-proof infrastructure and sustainable farming are the solutions – yet all remain beyond the reach of communities marooned in an era of physical currency and 20^th Century technology.

Financial inclusion is not simply about convenience – it is about livelihoods and lives.  Indeed, financial inclusion is deemed necessary for satisfying at least seven of the United Nations’ 17 Sustainable Development Goals to ensure ‘peace and prosperity for people and the planet’.[4]

Only a fairer and more equitable system of financial access can narrow the opportunity gap worldwide.

How is technology turning the tide for world’s unbanked?

The financial symptoms of a digitally-divided world are detectable everywhere.  While savings have increased globally over the past decade, the gap between prosperous and struggling economies is as profound as ever.  Mature markets have an average savings rate (the proportion of disposable income set aside rather than instantly spent) of 58% compared to just 25% in developing markets.[5]

In lower and middle income countries (LMICs), there is ample evidence that financial exclusion is limiting business growth.  Globally, it remains far easier to borrow money in an advanced economy (where 56% of enterprises are eligible for a loan) compared to emerging economies (23%).[6]  Of the approximately 400 million micro-enterprises in developing regions, up to 345 million are classed as informal: Having no employees other than the owner, generating only subsistence-level incomes, and unlikely to be registered for tax therefore failing to elevate national GDPs.[7]

These pen-and-paper businesses cannot grow, advertise or diversify in the way their rivals might in developed markets.  Nor can they strengthen their resilience by saving funds to survive fallow periods.  In particular, research has highlighted a US$ 173 billion finance shortfall for female-led micro-enterprises in LMICs.

However, other indicators are suggesting a gradual change in momentum.  While it is little comfort to the 1.4 billion worldwide who remain unbanked, fewer people are excluded from the financial apparatus with each passing year.  In 2011, some 2.5 million adults were forced to live hand-to-mouth, day-to-day, without a bank account – far exceeding the number who find themselves in a similar predicament today.[8]

Similarly, the gender gap between the banked and unbanked is slowly narrowing.  In developing countries, around 9% more men than women possessed a bank account in 2017.  By 2021 this gulf had narrowed to 6%, indicating positive steps towards female independence.

Forward-thinking governments are taking a more proactive approach to increasing financial inclusion.  More than 60 countries have launched national financial inclusion strategies with input from multiple stakeholders spanning telecoms, the environment, education and financial regulation.

In India, for instance, the Aadhaar scheme has equipped 1.2 billion workers with Universal Digital Identification, allowing salaries to be paid into formal bank accounts.  In Mexico, the National Council for Financial Inclusion is encouraging digital adoption by increasing the number of ATMs and point-of-sale terminals throughout the country.

As a major intergovernmental organization the World Bank also runs more than 100 schemes worldwide to promote financial inclusion.  These funnel cash towards agricultural resilience, social security, energy access and climate mitigation.  In 2024 the World Bank contributed to 6.8 million small businesses (around half of them women-led) needing financial services.  One project in Africa, for example, mobilized green private capital to help SMEs on their clean energy journey.

By bolstering economic growth and boosting productivity, financial inclusion is a goal worth striving for.  Progress in the sector is chiefly credited to our ubiquitous modern-day savior: Technology.

How are smartphones leading the fintech revolution?

Why have the numbers of unbanked individuals fallen, and why are we optimistic that the world will continue welcoming new members into the global financial community?  One of the most significant reasons is probably nestled right now in your hand or pocket.

As of 2023 the number of cellphone owners worldwide reached 4.3 billion, or over half of the global population.[9]  This trajectory is set to continue so that by the end of the decade the number of cellphone owners could top six billion.

Mobile technology is critical because modern smartphones are about so much more than texts and calls.  Smartphones mean access to the worldwide web.  Access to banks, both domestic and foreign.  Access to apps allowing users to pay for products with a simple swipe or accept payments for services rendered.  A cellphone opens the door to economic inclusion by introducing newcomers into the fundamentals of finance, helping them establish a verifiable credit record which can in turn be used to secure loans or make profitable investments.  Increasingly, cellphones are the keys which can unlock the door to financial liberty.

Yet this represents just the tip of the iceberg of the financial technology (fintech) revolution helping democratize access to money.

Research shows that over the past 10 years fintech, in its various forms, has helped more than a billion unbanked people access financial services for the first time – notably across emerging markets in Sub-Saharan Africa and Asia.[10]

Cellphones are enabling a new concept in personal finance for developing nations – the mobile money service.

Accessible through any app-equipped smartphone, a mobile money service allows users to send, store and receive payments without need for a conventional bank account.  For convenience, it also permits cash withdrawals at authorized agents.  Deposits are protected by local financial regulations, and a record is kept of every transaction so that money is safe if a SIM card is lost or stolen.  A trial scheme in Kenya among rural populations managed to lift around 2% of participating families out of poverty.[11]

With increasing numbers of people working in the gig economy, or being paid by the hour, the era of the monthly pay slip is waning.  How to settle that urgent bill, or buy the supermarket shopping, if you have worked for multiple employers during the week each with different payment terms?  Real Time Payment technology is emerging to fill the gap, allowing workers to quickly access pay accrued via an ‘earned-wage’ platform.  It is proving a vital lifeline for those on insecure incomes even in developed countries like the USA, where more than a quarter of workers report having zero savings.[12]

Liberating finance in emerging markets begins with a robust network infrastructure.  Tech firms are at the forefront of plans to invest billions of dollars in affordable connectivity and digital services across 16 Middle East, African and Asian countries between now and 2026.  The money will be spent on improving network speeds and driving fiber adoption.  A million households in Pakistan have already been introduced to the digital economy, with millions more set to follow.

Technology can help improve financial inclusion for female entrepreneurs too, who often have to fight to make their voices heard in many parts of the world.  Digital bookkeeping apps are helping small- and medium-sized enterprises (SMEs) to accurately record cash flow and inventory – vital financial records which in the absence of collateral can be used to secure a loan.  Similarly, electronic Know Your Customer (e-KYC) technology is helping female business owners in emerging markets access loans of up to US$ 20,000 by verifying their identities digitally.[13]

Fintech innovations can help protect customer assets while assuring compliance with state legislation, essential for any functioning system of financial inclusion.  Regulatory technology (regtech) and supervisory technology (suptech) tools are helping formalize the oversight of new finance platforms.  Regtech incorporates cutting-edge technologies such as AI, machine learning and blockchain to help companies abide by finance regulations within a given territory.  Suptech tools allow regulators to scrutinize mass volumes of data from financial institutions to expose violations or risk.  Together, regtech and suptech technology automates compliance processes for real-time monitoring, ultimately helping financial inclusion to flourish.

Embedded finance technologies (direct payment or loan tools accessible through non-banking websites) are proliferating, offering anyone with internet access faster and more versatile transaction choices.

New Fast Payment Systems are also hastening the spread of fintech across developing markets.  They permit the near-instantaneous transfer of funds between accounts far quicker than traditional electronic payments.  The technology is increasingly available to everyone and covers every type of transaction, whether person-to-person or business-to-business, either domestic or cross-border.  International initiatives such as the Payment Systems Development Group (PSDG) have so far helped more than 120 countries modernize their payment systems, with Brazil’s Pix and Costa Rica’s SINPE Móvil serving as key templates.

The private sector is enthusiastically pursuing the digitization of financial services to improve access to money.  Abdul Latif Jameel is leading from the front in global efforts to deploy fintech and widen inclusivity.

Bab Rizq Jameel Microfinance, part of Abdul Latif Jameel Finance Saudi Arabia, offers Sharia-compliant loans to long-neglected markets, helping nurture entrepreneurialism among innovators and SMEs.  Elsewhere in Saudi Arabia Cash Jameel allows customers to apply for a 10,000 to 300,000 Saudi riyals loan, without guarantor, through a phone app, with approval granted in minutes.

The Abdul Latif Jameel Investment Management Company (JIMCO), meanwhile, is investing in numerous businesses that enable individuals and corporates to access the finance they need, when they need it most. Investments include:

• Social impact fintech business Ziina, an instant payment platform allowing workers across the MENA region to withdraw wages early for work already completed but not yet paid.
• Buy-now-pay-later startup Tabby, helping customers across the UAE and Saudi Arabia pay for purchases in multiple instalments or via a deferred single payment at no extra cost.
• Turkish fintech firm Figopara, offering extended working capital to businesses by lengthening payment terms to suppliers.
• Thndr, a mobile-first equities trading platform allowing individuals to make commission-free investments in stocks, bonds and funds on the Egyptian Stock Exchange.
• Rain, easing access to cryptocurrency markets for investors across the Middle East.
• Riyadh-based Lean Technologies, a B2B platform developing user-friendly software for securely connecting financial service institutions to customer bank accounts.

Fintech will continue evolving in the future, bringing financial inclusion to the masses and resolving at least some of the woes endured by the world’s unbanked minority.  What does the future look like, and what should governments, NGOs and businesses be doing to prepare?

Will fintech and financial inclusion lead to a fairer future?

Based on the data, it appears that technology is propelling us to a more equitable and inclusive financial ecosystem.  As more countries digitize their economies, and as more citizens migrate their personal finances online, valuable new insights will be gained and funding opportunities unlocked.

Increasingly, ‘big tech’ will harness multiple data points – utility bills, rent receipts, sporadic income – to evaluate loan applications.  Data channels with unprecedented layers of security will allow governments, businesses and banks to incubate a fertile culture of open banking.  The secure exchange of sensitive financial information will help sole traders become SMEs, SMEs become large businesses, and large businesses one day become multinational corporations.

Looking further ahead, public and private sectors must unite to focus on the underlying priorities of a digital ecosystem: Connectivity, cybersecurity, data privacy, digital ID and physical infrastructure.

More research is needed to circumvent the problems inherent in a financial system which is becoming more automated and, arguably, less human.  We need to assess potential hazards surrounding consumer protection.  We need to understand the dangers of overborrowing, for both individuals and businesses.  We need to ensure that women and other under-served minorities are also able to share in the wealth of new opportunities.

All institutions have a part to play.

Banks must develop strategies to promote responsible borrowing and spending.  Payment providers must work with fintechs to analyze data and enable sustainable investing.

Governments must legislate for the open sharing of data and encourage the transition by shifting their own payments to the digital realm.

International lawmakers must harmonize regulatory frameworks and ensure cross-border technological compatibility.  NGOs must further expand inclusion by helping to improve financial literacy and by leveraging the benefits of fintech at grassroots level.

“The rewards could be deep and enduring,” says Jaroslav Gaisler, Chief Executive Officer, Financial Services & FinTech, Abdul Latif Jameel.

“Fusing fintech with the concept of financial inclusion unleashed the ideas and energies of untapped innovators within markets too often overshadowed by more mature economic rivals.

“We all stand to benefit from a mutually prosperous world.”

Fast Facts: Tech’s impact on financial inclusion

How many adults worldwide lack access to basic banking services?

Approximately 1.4 billion people – about a quarter of the world’s adult population – are unbanked, with no access to a bank account or appropriate alternatives.

How has mobile technology adoption changed the financial landscape?

As of 2023, there are 4.3 billion cellphone owners worldwide (over half the global population), and fintech has helped more than a billion previously unbanked people access financial services over the past decade.

Which regions are most affected by financial exclusion?

Around 80% of the 1.4 billion financially excluded adults live in emerging markets, particularly in Sub-Saharan Africa and Asia, which are also on the frontline of climate change challenges.

How much progress has been made in reducing the number of unbanked people?

The number of unbanked adults has fallen significantly from 2.5 billion in 2011 to 1.4 billion today, demonstrating steady improvement in financial inclusion.

How many countries have national financial inclusion strategies?

More than 60 countries have launched national financial inclusion strategies involving multiple stakeholders from telecoms, environment, education, and financial regulation sectors.

[1] https://www.weforum.org/stories/2024/07/why-financial-inclusion-is-the-key-to-a-thriving-digital-economy/

[2] https://www.bcg.com/publications/2024/to-expand-financial-inclusion-embrace-innovation

[3] https://www.worldbank.org/en/topic/financialinclusion/overview#1

[4] https://sdgs.un.org/goals

[5] https://www.worldbank.org/en/topic/financialinclusion/overview#1

[6] https://www.worldbank.org/en/topic/financialinclusion/overview#1

[7] https://www.gsma.com/solutions-and-impact/connectivity-for-good/mobile-for-development/wp-content/uploads/2023/02/Empowering-women-micro-entrepreneurs-through-mobile.pdf

[8] https://www.worldbank.org/en/publication/globalfindex

[9] https://www.gsma.com/newsroom/press-release/smartphone-owners-are-now-the-global-majority-new-gsma-report-reveals^/

[10] https://www.weforum.org/stories/2025/01/financial-equity-through-technology/

[11] https://www.weforum.org/stories/2025/01/financial-equity-through-technology/

[12] https://www.bankrate.com/banking/savings/emergency-savings-report/

[13] https://www.gsma.com/solutions-and-impact/connectivity-for-good/mobile-for-development/wp-content/uploads/2023/02/Empowering-women-micro-entrepreneurs-through-mobile.pdf

Authorities in Denmark are urgently studying how to close an apparent security loophole in hundreds of Chinese-made electric buses that enables them to be remotely deactivated.

The investigation comes after transport authorities in Norway, where the Yutong buses are also in service, found that the Chinese supplier had remote access for software updates and diagnostics to the vehicles’ control systems – which could be exploited to affect buses while in transit.

Amid concerns over potential security risks, the Norwegian public transport authority Ruter decided to test two electric buses in an isolated environment.

Bernt Reitan Jenssen, Ruter’s chief executive, said: “The testing revealed risks that we are now taking measures against. National and local authorities have been informed and must assist with additional measures at a national level.”

Their investigations found that remote deactivation could be prevented by removing the buses’ sim cards, but they have not done this because it would also disconnect the bus from other systems.

Ruter said it planned to bring in stricter security requirements for future procurements. Jenssen said it must act before the arrival of the next generation of buses, which could be even “more integrated and harder to secure”.

Movia, Denmark’s largest public transport company, has 469 Chinese electric buses in operation – 262 of which were manufactured by Yutong.

Jeppe Gaard, Movia’s chief operating officer, said he was last week made aware that “electric buses – like electric cars – can be remotely deactivated if their software systems have web access”. He added: “This is not a Chinese bus problem. It is a problem for all types of vehicles and devices with Chinese electronics built in.”

Gaard said the Danish agency for civil protection and emergency management told it that it was not aware of any specific cases in which electric buses had been deactivated, but warned that the vehicles were equipped with “subsystems with internet connectivity and sensors (cameras, microphones, GPS) that can constitute vulnerabilities which could be exploited to disrupt bus operations”.

Yutong said it “strictly complies with the applicable laws, regulations, and industry standards of the locations where its vehicles operate” and that Yutong vehicle terminal data in the EU were stored at an Amazon Web Services (AWS) datacentre in Frankfurt.

A spokesperson added: “This data is used solely for vehicle-related maintenance, optimisation and improvement to meet customers’ after-sales service needs. The data is protected by storage encryption and access control measures. No one is allowed to access or view this data without customer authorisation. Yutong strictly complies with the EU’s data protection laws and regulations.”

Thomas Rohden, the chair of the Danish China-Critical Society and a regional Social Liberal party councillor, said Denmark has been “way too slow” when it came to dependence on Chinese companies.

“This is a huge problem. We should not be so dependent on a country that has values and ideals so different to Denmark,” Rohden said. He added that at a time when Denmark was trying to increase its resilience amid allegations of hybrid attacks by Russia “it’s not very resilient to be totally dependent on China”.

The Norwegian ministry of transport declined to comment.

As the global race for critical minerals intensifies, Australia is emerging as more than a supplier to traditional partners. Canberra is well positioned as a strategic bridge linking Africa’s vast mineral wealth to the industrial needs of the Indo-Pacific. This matters not only for its alliance with Washington, but the resilience of supply chains stretching from Tokyo and Seoul to New Delhi. With China dominating African extraction and refining networks, Australia’s engagement offers an opportunity to rebalance power and build more secure, transparent mineral flows.

Australia can no longer sustain the old balancing act, maintaining a close US alliance while deepening economic ties with Beijing. Joining AUKUS in 2021 signalled a decisive alignment with Washington and the Critical Minerals Strategy 2023–2030 prioritises collaboration with “like-minded partners.” The importance of this alignment was reaffirmed with Prime Minister Anthony Albanese’s October 2025 visit to Washington. The two countries signed a framework to secure critical mineral supply chains through shared investment, streamlined regulation, fair-trade protections and improved recycling.

Strengthening engagement with Africa would position Australia at the crossroads of great-power competition and the energy transition, elevate regional influence and shape global supply chains.

More than 170 ASX-listed companies operate in 35 African states with investments valued at $40 billion, comprising graphite in Tanzania, copper and cobalt in the Democratic Republic of Congo, and rare earths in Uganda. Walkabout Resources developed the Lindi Jumbo graphite project in Tanzania with approximately $31 million in debt financing and long-term offtake contracts. BHP has entered Botswana’s Kalahari Copper Belt through an “earn-in” agreement, securing up to 75 percent of copper-silver prospects. Iluka Resources signed a 15-year deal to import monazite concentrate from Malawi for its $1.65 billion Eneabba refinery – the first fully integrated rare earths facility in Australia – and is advancing Kenya’s Mrima Hill project with RareX to establish a non-China supply route.

These ventures anchor Australia’s role in mining and establish midstream processing vital to Indo-Pacific security.

Leaving open the possibility of cooperation with China on terms that uphold African agency and sustainability would ensure Australia’s diplomacy is not entirely adversarial.

African mineral exports to the United States rarely travel directly. Most are routed through Asia for processing. Chinese refineries dominate, reinforcing Beijing’s leverage over regional supply chains. Without Australia’s engagement, African resources will continue to feed China’s industrial base. Investing in Africa provides Australia with an opportunity to redirect flows toward trusted networks serving Japan, South Korea, India and ASEAN economies that are all dependent on stable mineral access for clean energy, defence and manufacturing.

In 2023, Washington and Canberra launched the Climate, Critical Minerals and Clean Energy Transformation Compact to align investment and policy frameworks. Australia’s broader strategy allocates $2 billion to support miners and processors aligned with democratic partners. These efforts connect to the US-led Minerals Security Partnership (MSP), a multilateral initiative for sustainable mineral sourcing involving Japan, India and the EU. Together with the Quad Critical Minerals Partnership and Indo-Pacific Economic Framework for Prosperity (IPEF), these initiatives embed Africa’s role within regional security and economic strategies.

African nations possess 85% of global manganese as well as 80% of platinum and chromium, along with nearly half of all cobalt and vast copper and graphite deposits. Despite renewed US interest, Chinese engagement remains dominant, built on decades of investment and processing capacity. US private capital such as KoBold Metals, backed by Bezos and Gates, and Australia’s AVZ Minerals are jointly investing over US$1 billion in the DRC’s Manono lithium project. The US Development Finance Corporation has committed US$553 million to Angola’s Lobito Atlantic Railway and projects such as Pensana’s rare earth facility and green copper initiatives in Zambia.

Chinese enterprises dominate much of the continent’s extraction, sending materials to Chinese refineries that supply the Indo-Pacific. This provides Beijing with leverage over both African and Asian markets. Deeper Australian engagement would help ensure Indo-Pacific partners are not hostage to this industrial dominance. Selective cooperation on sustainability, infrastructure or conflict-sensitive governance can promote constructive engagement of benefit to African partners and ease strategic rivalry.

Australia offers three key advantages: 1) Trusted governance, 2) Mining expertise, and 3) the ability to convene alliances. Coupling African resources with Asia-Pacific demand positions Canberra as more than Washington’s ally to become a regional leader shaping standards for responsible mining and transparent trade. Platforms such as the Quad and MSP enable diversified supply chains to bypass Chinese choke points. Strategic investments in African projects, reinforced through refinery arrangements such as Iluka’s Eneabba facility can feed refined materials into Australian, US and wider Indo-Pacific markets.

Leaving open the possibility of cooperation with China on terms that uphold African agency and sustainability would ensure Australia’s diplomacy is not entirely adversarial. Pragmatism could enhance its credibility across Africa, where governments prefer inclusive partnerships over binary choices.

Canberra’s mineral diplomacy highlights Africa as the strategic missing link in Indo-Pacific resilience. Expanding beyond the traditional supplier role will help establish a more balanced global system bridging African resources with Asia’s industrial demand, reinforcing governance and transparency and tempering China’s leverage. Australia would not only reinforce ties with Washington, but strengthen its own leadership across the Indo-Pacific. Keeping open channels for constructive engagement demonstrates Canberra’s approach is not exclusionary, but rooted in shared interests in resilient, transparent and sustainable supply chains of benefit to both Africa and emerging economies close to home.

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The European Central Bank’s plan to launch a digital euro by 2029 has run into strong opposition from EU lawmakers and Europe’s banking industry.

Ahead of a key European parliamentary hearing on the project on Wednesday, 14 lenders including Deutsche Bank, BNP Paribas and ING warned that the digital euro could undermine private sector payment systems.

The 14 banks have teamed up to create a private sector rival to US payments companies such as Mastercard, Visa and PayPal. The service, Wero, was launched last year.

“The current design of the retail digital euro largely addresses the same use cases as private solutions, without offering any clear added value for consumers,” the banks said ahead of Wednesday’s hearing.

Fernando Navarrete, a conservative MEP from Spain appointed by the European parliament to assess the digital euro, has also argued for a significantly scaled-down version of the project.

The ECB began evaluating digital central bank money in 2020. Last week, its governing council formally decided to take the necessary steps to be in a position to issue the first digital euros “during 2029”, with a pilot exercise aimed for 2027. The legislation underpinning the project was proposed by the European Commission in 2023.

Current laws only empower the ECB to issue physical cash rather than digital tokens so the project can only move forward if EU governments and the bloc’s parliament give it the green light.

A dramatic decline in the use of cash and the dominance of US payments providers creates the need for the digital euro to protect “our freedom, autonomy and security”, ECB executive board member Piero Cipollone said in September. The share of cash used in stores fell from 72 per cent to 52 per cent in the five years to 2024.

The digital euro has received a boost from the rapid development of US-backed stablecoins, which many in Europe feel could threaten the role of the euro.

The 20 finance ministers of the Eurozone member states last month backed the ECB’s digital euro plans, welcoming “the recent progress achieved in advancing the digital euro project” and urging lawmakers in Brussels to enact the necessary legal changes quickly. 

Navarrete argued in a report published last week that the digital euro should only be used instead of coins and banknotes for payments without internet or mobile connection but crucially not as a digital means of real-time payments for other transactions, including online, as envisioned by the ECB.

In his report, Navarrete warns that online payment functionalities could create “a parallel payments ecosystem hindering private solutions from reaching pan-European scale”. 

The online version of the digital euro should only be launched if European private sector rivals to US payment providers failed, he argued.

Navarrete told the Financial Times that the private sector was “closer than ever before” to creating a competitive payments system, adding that “a responsible policymaker approach should be to set the framework to maximise the odds for this to happen” while at the same time “being ready for a fallback option”.

It is unclear if Navarrete’s views are shared by the majority of the parliament, with social democrats, liberals and greens all supporting the digital euro, as well as members of his own conservative group. 

His assessment was welcomed on Tuesday by the German Banking Industry Committee, the country’s top banking lobby group, which called current plans “too complex” and “too expensive”, warning that it offered “little tangible benefit for consumers”.

In a study commissioned by European banks, PwC estimated that the launch of the digital euro could cost the financial sector up to €30bn. The ECB has rebuffed this estimate, putting the costs at just under €6bn.

“25 years after the euro’s launch, there is still no pan-European, competitive payments solution,” said one senior central bank official, adding that even the successful creation of a domestic private sector rival to Visa and Mastercard would not be a permanent fix to the challenges as its ownership could change.

“Visa Europe used to be European but was eventually sold,” the central banker said.

Beijing/Hong Kong
 — 

Nearly three decades ago, Starbucks opened its first outlet in China with much fanfare, involving a troupe performing a traditional “golden lion” dance and eager customers trying cappuccinos made with steaming espresso machines.

The entry of the American brand helped spur the rise of a thriving coffee culture among the burgeoning middle class of a country that traditionally drank tea, and Starbucks soon became a symbol of Western influence in a more affluent China.

At one point the Seattle-founded coffee giant was opening a new store every 15 hours in China as it rode the wave of the country’s economic boom –– making the market a cornerstone of the US company’s global strategy.

But that’s all about to change, with Starbucks announcing on Monday that it will sell the controlling stake of its operations in the world’s second largest economy to a Chinese investment firm.

Under the deal, Boyu Capital will hold up to a 60% interest in Starbucks retail operations in China of over 8,000 outlets, with the coffee chain retaining a minority 40% stake and continuing to license the Starbucks brand and intellectual property to the new entity.

For Starbucks patrons at an upscale mall in Beijing’s central business district – the same complex where the company first opened its doors in China in 1999 – the news doesn’t come as a complete surprise.

“When Starbucks first came to China, it positioned itself as an accessible luxury, something everyone could enjoy,” said Si Huazheng, a 28-year-old in the car sales industry who was working from his laptop at the shop on Tuesday morning.

“But now, with so many domestic coffee brands popping up, the landscape has changed,” Si added.

Starbucks is beset by a myriad of challenges in China, including fierce domestic competition and a more cost-conscious consumer base, which also includes a cohort of young people who prefer to back homegrown brands.

Dozens of beverage chains have exploded onto the scene in recent years offering coffee at steep discounts.

At the top of that list is Luckin Coffee, a Chinese brand that has overtaken Starbucks in both sales and store count, boasting three times as many outlets in the country and coffee priced as low as one-third of Starbucks’ offerings.

Luckin rose to prominence within just a few years after its founding in 2017, appealing to the country’s younger generation, and now it’s also challenging Starbucks on its home turf, opening its first outlets in New York City in June.

The beverage market in China today is nothing like the one Starbucks entered 26 years ago, when China’s economy was just beginning to take off, lifting an estimated hundreds of millions of Chinese into the middle class.

Back then, there was little mainstream coffee drinking culture to speak of, and the brand was one of a handful of American food and beverage chains vying to establish themselves in country after China’s opening-up in the early 1980s.

Starbucks’ success was forged on the back of a growing demand for Western luxuries, as well as a strategy of adapting products for the market –– to appeal to customers beyond China’s top-tier cities.

Seventy-year-old retiree Liu Zishang recalls when the outlet first opened its doors in Beijing and said it took some time for the Chinese people, like him, to get used to the taste of coffee.

“Through my spending, I get to feel the culture of Starbucks, and that’s when I started thinking, ‘Hey, this is good,’” said Liu, who was relaxing at a Starbucks in Beijing on Tuesday morning, while waiting for his grandson to finish ice skating in the same mall complex.

But he acknowledged challenges that the outlet is facing could be linked to the country’s sluggish consumption.

“The economic situation in China is declining, and the number of wealthy people is shrinking.” Liu said. “With the pressure of buying homes, cars, and loan payments, it’s probably weighing on their spending.”

China’s weak consumer demand, a result of the country’s years-long property downturn and high youth unemployment rate, has made the country’s 1.4 billion people less willing to spend.

In fiscal 2025, Starbucks reported a 1% decline in same store sales in China, weighed down by 5% decrease in the average amount of money a customer spends per transaction.

Starbucks has also come under intense competition from the surging popularity of tea drinks chains like Mixue Bingcheng, ChaGee and HeyTea.

Mixue, which has overtaken McDonald’s and Starbucks as the world’s largest food and beverage chain by number of stores, offers its signature drinks and various coffee options for between the price of 2 to 8 yuan (30 cents to $1.20). Starbucks’ new majority owner in China, Boyu Capital, has also backed Mixue in its initial public offering earlier this year.

Rivals ChaGee and HeyTea, meanwhile, target fast changing taste buds of young Chinese consumers, with unique tea and drinks offerings like Jasmine green milk tea and grape-blended tea with Cheese foam.

The US-founded coffeeshop does still have appeal for its atmosphere and perception as a “high-end brand,” according to Carrie Chen, 28, who works in finance and frequents Starbucks three to four times a week.

“If you meet clients or chat with friends at Starbucks, it shows that you value the occasion,” said Chen.

But Chen, who was sipping on a hazelnut toffee latte while taking an online course at the shop, also said Starbucks gives the impression it is “playing it safe” with its flavors and offerings in the current market.

When asked about Starbucks’ divestment in China, Chen said the period of Starbucks’ rapid growth in the country may have already passed, but a Chinese partner could potentially “elevate Starbucks to a higher stage.”

Starbucks’ decision to divest in China is the result of a languishing Chinese business strategy, as well as intense price competition and an interest from consumers in supporting domestic brands, said Jin Lu, a public affairs expert who has worked with international brands in China for decades.

“I believe it is yet another quick-fix and only will help the company in the near term,” he said.

The new joint venture will face “tough battles” ahead, though the partnership would be able to bolster Starbucks’ competitiveness, said Dan Su, a Morningstar analyst.

“Menu innovation and digital transformation are necessary in the coming quarters to reassert Starbucks’ position against competing coffee, specialty tea, and other local beverage chains,” Su wrote in a Tuesday note to clients.

Many of Starbucks’ problems in China are identical to those it faces all over the world – particularly in its home market. In North America, the Seatle-based beverage company is getting squeezed by independent coffee shops and growing rivals like Blue Bottle. Some American customers are also shunning Starbucks for its relatively high prices, compared to McDonald’s and other less expensive chains like Dunkin’.

Together, they underscore the struggles Starbucks has faced in recent years, following a series of strategy mishaps that resulted in a leadership shake-up and the appointment of Brian Niccol as CEO last year. In a bid to deliver a quick turnaround, the new top executive initiated a plan to close hundreds of stores, or about 1% of its locations, in the United States and Canada.

One year after taking the helm, Niccol’s restructuring plan – including menu pare-back as well as store closures and remodeling – has shown mixed results. Last week, Starbucks reported a 3% annual increase in revenue and 1% decline in sales for locations open at least a year for its fiscal year 2025 ending in September.

The joint venture announced Monday for Starbucks’ China business followed a year-long search for a local partner, with Niccol believing a strategic partner could accelerate growth in its most important foreign market.

“We see a path to grow from today’s 8,000 Starbucks coffeehouses to more than 20,000 over time,” he said in a company blog post about the Boyu Capital partnership.

Starbucks expects the total value of its China retail business to exceed $13 billion, according to the statement.

Already, the divestment news is stirring up some excitement on the Chinese internet, with some netizens wondering if Starbucks may join competitors Luckin Coffee and others in offering more affordable drink options.

“Normally, I drink Luckin because Starbucks is just too expensive,” one person wrote on social media Weibo.

“One cup of Starbucks costs me enough to buy three or four cups from Luckin.”

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Google has denied any wrongdoing throughout the closely watched litigation.

Under the new proposal, Google would allow users to more easily download and install third-party app stores that meet new security and safety standards.

Developers will also be allowed to direct users to alternative payment methods both within apps and via external web links. Google said it would implement a capped service fee of either 9% or 20% on transactions in Play-distributed apps that use alternative payment options.

Tuesday’s court filing from Google and Epic asked Donato to modify his injunction, while keeping many parts of it intact.

Google faces other lawsuits from government, consumer and commercial plaintiffs challenging its search and advertising business practices. It has denied violating state and federal laws in those cases.

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