A customer pays his bill with WeChat Pay in Hong Kong. [Photo/Xinhua]

After a period of explosive growth, the financial technology - or fintech - sector in China will likely see slower but more regulated growth, with greater emphasis on leveraging technology to drive true innovation, analysts said.

China has emerged as a leading fintech market globally, with analysts estimating the market size to have exceeded $243 billion by the end of last year, accounting for about 85 percent of the global market share.

The sector's fast and furious growth was also illustrated by the surge of fintech investment in the country, which attracted capital of $8.8 billion between July 2015 to June 2016, equivalent to an increase of 252 percent since 2010, according to a report by Singaporean banking giant DBS Group and global accounting firm Ernst & Young.

Chinese fintech companies have been thriving through meeting the market's growing demand for financial services that are underserved by the country's traditional banking sector.

Internet giants such as Alibaba Group and Tencent Holdings have made a name for themselves both at home and internationally with their third-party electronic payment services, as well as the online wealth management products.

Peer-to-peer lending, small and micro loan services, as well as online insurance sales, have also flourished by taking advantage of the rapid digitalization and explosive online and mobile penetration in China.

Behind the sector's phenomenal growth were rising risks and irregularities that have alerted the country's financial regulators. Stringent measures have been adopted by the regulators, aiming to incorporate the fintech sector into the country's financial regulatory framework. New rules have also been drafted to tackle financial fraud and protect the interests of smaller investors and players in the sector.

One example is the tightened regulation of internet-based micro loan services. Media reports said that the People's Bank of China, the country's central bank, has suspended the approval of applications for setting up new online micro-loan lending services.

Alipay's display at Beijing Capital International Airport which recommends people to pay their parking fee by Alipay. [Photo/Xinhua]

Analysts believe that the torrid growth of China's fintech sector will inevitably slow, which will present both challenges and opportunities for the companies, especially as more mature regulations are imposed, and a degree of consolidation may take place.

Chen Huan, chief strategy officer of CreditEase Group, a Beijing-based financial technology firm and peer-to-peer lending platform, said that the future trend of the fintech will put an emphasis on greater standardization, professionalism and a scale-driven business model.

"In essence, the fintech companies and the traditional financial institutions are the same. The key is whether you have better means to obtain data and information so that you can know your clients better and be able to provide various services," Chen said.

Cliff Sheng, partner and head of financial services for Oliver Wyman Greater China, said that future fintech companies will differentiate themselves by pushing the frontiers of technological innovation as the window of regulatory arbitrage closes.

Big-data analytics, the internet of things and blockchain are the three most representative technologies, owing to their ground-breaking capabilities to acquire, assemble, analyze and apply information, according to Sheng.

"With the ongoing integration of fintech into the regulatory framework, we believe the development of fintech in China has reached a turning point. From now, technology will be the key driver of valuechain disruption in an increasingly data-driven industry," Sheng said in a report.

China will continue to dominate the global fintech industry with a very strong domestic market, analysts with DBS Group and E&Y said in the report.

Capital investment will pour in and the market is being bolstered by substantial government support for innovation, they said, adding that demand will continue to be driven by underserved small and medium-sized companies and tech-savvy, often unbanked, consumers keen to access financial services via their mobile phones.