Nine pictures to understand the Internet financial model

Absrtact: Internet finance, the most popular topic in the last two years, as a new concept, there is no authoritative definition. Professor Xie, the first author of the concept, mentioned in the study of the Internet financial model: In this financial model, the branch

Internet finance, one of the hottest topics of the last two years, as a new concept, there is no authoritative definition. Professor Xie, the first author of the concept, said in the study of the Internet financial model: "In this financial model, the payment is convenient, market information asymmetry is very low; both sides of the supply and demand are directly traded, and financial intermediaries such as banks, brokerages and exchanges do not work. can achieve the same resource allocation efficiency as today's direct and indirect financing and reduce transaction costs dramatically while promoting economic growth. ”

In fact, the major media as long as the Internet companies to provide financial services, or financial institutions to provide Internet services, will be classified as "internet finance." Many media people or analysts have their own set of standards, Professor Xie and Shung, Liu Hai in the subsequent book "Internet Finance Handbook" also combed the composition of internet finance. In my opinion, most of them fail to cover the whole of internet finance. Relying on the principle of mece (mutually exclusive, collectively exhaustive, do not leak), this article will be based on the most basic financial needs, with simple and clear charts for the reader to draw the full picture of internet finance.

Financial needs

One of the key elements of Internet thinking is to consider the problem from the user's needs. So let's think first of all, what are the financial needs of users?

From the user's point of view, the Internet finance and traditional finance is not bad, the same is to meet the three basic financial needs of users: investment, financing, payment.

Investment: Money-rich people want to make money (deposits, insurance is also a kind of investment). Financing: People who lack money need money, and financing costs (such as interest and fees for borrowing), but money is actually paid. To pay: the flow of money.

The above language definition may be a bit simple and rough, and the following diagram will give you a more intuitive explanation:

Investment and financing are a complementary whole. Investment is a surplus of money to spend money, financing is a shortage of money to buy money, a slap does not ring, a transaction always have the buyer and seller can be successfully reached.

In contrast, payment can be independent of investment and financing activities, self-reliance and self-reliance. Take a chestnut, we usually buy daily necessities online payment, the whole process does not involve investment or financing activities.

After figuring out these three basic financial needs, we will explore the full picture of internet finance. The entire investment and financing process is shown in the following illustration. A surplus person gives money to a person who is in short supply, and a person who is short of funds returns the principal and the return or loss of investment. (the arrow in the figure only indicates the direction of investment capital flow)

Traditional financial institutions, often referred to as financial intermediaries (Financial intermediates), are responsible for providing liquidity to financial markets. Banks, for example, have cash surpluses that deposit money in banks to earn interest, banks to cash in, and financiers to pay interest.

Traditional financial institutions, though called financial intermediaries, are actually included in the simplest models.
Take the bank as an example, the traditional financial institution is the role of the fund shortage in the transaction of the surplus person's deposit. The traditional financial institution is the role of the fund surplus in the transaction of financing loan of the fund shortage person.

On the basis of the most basic process of investment and financing, sometimes because the information is not transparent enough, a third party outside the investment and financing needs to intervene to facilitate the matching of supply and demand information and complete the investment and financing activities.

In addition, because the investment and financing activities bear various risks, and each investment and financing of the main body has different risk tolerance, information is particularly important.

Taking systemic risk (systematic disorientated) as an example, the investment and financing itself is affected by many market factors, such as politics, economy, society, technology and industry itself. This information will better enable investors to understand the risks and rewards of different projects, and to let financiers know the cost of different financing channels. They will directly affect the investment decisions of the cash surplus and the financing decision of those who are short of funds.

See above the picture may be some readers will doubt: traditional financial institutions are not belong to the third party in the above figure? To address this issue, I would further explain the role of third parties in the investment and financing process.

Third parties do not absorb funds or lend money, but only as a matchmaker, matchmaking and financing both sides, the two sides of the investment and financing are one by one corresponding. From this perspective, the so-called Peer-to-peer lending platform with a pool of funds is not a third party, but a surplus or shortage of funds.

Traditional institutions may also be third parties: in the case of bank-consignment funds, the fund company is a shortage of funds, retail investors are surplus, and banks are third parties. In terms of financial banking, a third party is only a "channel".

To clarify the process of investment and financing, we would like to introduce the following:

Three business models in the field of investment and financing

I. OWN PRODUCTS

In the process of investment and financing in the absence of the third party, its own products are the main play of internet finance.

As most of the investment and financing products (including deposits, loans, funds, trusts, insurance, etc.) require the licences of traditional financial institutions to design, packaging, production. Internet finance's own products are mainly the Internet of traditional financial institutions, that is, the "financial Internet" that the media often say.

In addition, there are many internet companies, electric business enterprises to kill into the traditional financial industry: Alibaba, Suning, Baidu, Beijing East, Oppu have set up microfinance companies, Suning registered "Suning Bank" intends to enter private banking, Alibaba and Tencent shares of private banks have also been approved successively. In this field, the outstanding performance is the Internet/electric business of small loan companies, and private banks because they have just started, not much results. We will discuss the private bank in the later article.

There are many financial institutions and Internet companies close cooperation and integration, and jointly develop Internet financial products. such as Alibaba acquisition Tianhong Fund 51% Stake, as well as 2013 made a booming "three horse sell insurance", earn enough attention.

To sum up, its own products in this field mainly has the following three kinds of manifestations:

Financial Institutions Internet: financial institutions set up an online platform, not only to provide investment products also provide financing products, such as electronic banking, insurance network sales. Internet companies financial institutions: to be a manufacturer of financial products, Internet companies must obtain relevant licences. In this category, there are two bright spots: first, the Internet/electric business small Loans Company, with the help of the Electronic business platform to collect transaction data, so as to tap the financing needs of online merchants, and the use of large data to control credit risk, small loan business, such as Ali small loans. The second is the private bank that the internet company shares. Financial institutions and Internet companies in cooperation to develop: financial institutions and Internet companies in the equity level of cooperation, the establishment of joint ventures and access to financial licences, joint design, packaging, production of investment and financing products, such as public security online.

Above, I will expand in detail in Chapter one by one later.

Ii. Financial Services Intermediary

Financial Service intermediary is the role of "third party" in the process of investment and financing.

In fact, the process of investment and financing is the same as the process of physical transactions, the need for buyers (investors to pay), there are sellers (selling equity, debt or other interests of financiers), there are commodities (equity, debt or other interests).

Before studying financial services intermediaries, we can think about the major market participants in the field of E-commerce:

The above concepts are already well known to most people. I don't have any more nonsense. b End is enterprise, C end is a person.

Here you need to spend a little bit of time explaining the b2c--in the picture.

There are two main types of brands that the company refers to:
One is platform B2B2C, which allows businesses to enter, and to the C-end customers sell products of the electric business platform, such as the days of the cat, after the transformation of Jingdong Mall, and so on; another platform-less retailer, who buys from others and sells to customers, is not responsible for making goods, such as Jingdong and a shop before the transition.

We only study these two kinds of business-to-consumer, such as Fank, such as private brand of the company's Web site is not discussed here (previously we mentioned Ali small loans and other proprietary products can actually be analogous to the private brand of the Web site).

Shopping for the site from the user needs, matching the user's goods, the flow of traffic to lead to the seller.

After understanding the business model of the electric dealer, we must also realize that there are two big differences between the financial market and the e-commerce markets.

One is that financial products are not expendable, and prices fluctuate, so financial markets need a market in which the markets ' participants can trade (that is, the "level two market" often called the financial sector) to meet demand, a role typically borne by the exchange.

Second, the two-tier financial market usually requires the involvement of brokers (Brokers) to improve market efficiency or to keep confidential the information of the counterparty. Brokers can also provide investors with additional services such as margin lending.

Incidentally, in addition to brokers, the exchange has a role-market maker (dealers). China's a-share market has not yet done business mechanism, but the new Sanbanxi (pilot) and other OTC markets (over-the-counter market) already have market-making mechanism exists. However, the market maker is not a third party, it needs to buy and sell the financial products, low buy the middle price of selling, it is in the course of the transaction is a surplus or lack of funds role.

Therefore, we can successfully extend the concept of the picture to the financial services intermediary.

F refers to financial institutions (Financial institutions).
n refers to a non-financial organization or individual (non-financial organizations/individuals).

(To explain the F2F, f2n these messy terminology, but the author casually made out, in the industry does not have a high degree of identification, the players please use caution. ）

Below, I will further explain the six financial services intermediaries in the above figure:

F2F: Transactions between financial institutions are mostly one-to-one, but there are also a number of trading platforms, such as interbank markets. Since most of the F2F models are dominated by regulators or in the form of exchanges (such as Lu Jin's F2F business lfex), I am not going to expand on them in detail.

F2N: including platform f2n and non-platform f2n, retail users can purchase funds, insurance and other financial products directly on f2n, and carry out investment and finance. Platform-type f2n is an online financial products market (harsh place), where financial institutions can enter the platform and directly sell financial products to customers, and financial institutions as direct sellers, such as Taobao funds, Taobao insurance and so on. The most famous balance treasure is only a variant. In addition to the micro-credit public number, many financial institutions also stationed in the micro-letter, in the form of service numbers to provide content. Non-platform f2n sales of products are not their own production, it is only to do consignment work, generally from the financial products manufacturers (funds, insurance companies, etc.) to collect commissions, such as Daily Fund network, Copper Street and so on. In addition to the purchase of investment products, users can also apply for loan products, such as the Internet supply chain Financial model: the Electronic Business platform and the bank to provide supply chain financial services for the supplier platform suppliers. At present, Jingdong Mall, Suning easy to buy, ebay, etc. have cooperated with the bank, launched the business. Originally intended in March 2014 by Tencent, Alibaba, Citic Bank launched a network of credit cards, its essence is the credit card products sales channels for the new expansion, but the plan was stopped by the central bank.

N2N: On behalf of the public-funded platform, there are financing needs of individuals/institutions can be launched in the public platform projects, to equity, debt, or pre-sale/group purchase, such as the way to raise project funds to investors. One thing to note is that Peer-to-peer lending platform is the essence of the debt based on the public platform, which we will explain in detail later. The domestic market participants have angel sinks, everybody throws, everybody lends, pats the loan, the Lu Jin, the roll-call time, the public raises the net, the Chase dream Net and so on.

Shopping Guide Website: that is, the financial Flow distribution website (also known as the financial vertical search), according to the user's financial needs, the financial flow distribution site will match the financial products suitable for customers (currently covering loans, credit cards, financial products, etc.), the domestic market participants are mainly 360, good credit net, I love cards, Baidu loan search, 24 wealth and so on.

Exchange: A two-tier market for users to trade financial products or commodities. In addition to the two major stock exchanges, most readers may not know that the domestic commodity electronic exchanges in the 2013-year close to 100 (at the peak of 2012, the domestic exchanges and even more than 900, and then the Ministry of Commerce, the central bank and the Securities and Futures Commission under the joint reorganization of the number of domestic exchanges At the same time, there are nearly 20 financial asset exchanges in Beijing and Chongqing. And the Internet exchange is also slowly rising, such as each Peer-to-peer platform level two trading market, Lu Jin's Lfex and so on. Readers may notice that the stock exchange has wrapped up several of the previous types of deals, mainly because most exchanges have also assumed a primary market release function.

Broker: In the stock market, the broker's role is borne by the broker. In the field of Internet finance, I will discuss the development of Internet brokerage.

III. Information Supply and analysis

After talking about the two main business models of our own products and financial service intermediaries, we will briefly introduce the last business model in the field of investment and financing-information supply and analysis.

Market participants in this field contribute to investment and financing activities by providing timely and effective information and analysis to customers, such as digging Treasury accounts, Bloomberg, financial portals, Tencent trader, snowball finance and so on. If you know how to use them, they are no worse than private investment advisers.

Business model to meet payment requirements

More extensive financial needs than investment financing is to pay, online consumption under the line will need to pay, or even the line of the future consumption can be paid online. If you think about how we usually pay, you'll find that the payment process is simple:

The payer uses a medium that has the function of payment means (i.e. currency ￥) to pay directly to the payee or indirectly to the payee through a third party.

So the Internet financial enterprises want to pay in the field, there are only two ways: to become a third party, or become a medium. Correspondingly, internet finance has two business models that can be implemented in this field:

Electronic Payment: As a third party outside the buyer's seller, to provide users with desktop/mobile terminal electronic payment and transfer, payment, such as online Banking, Alipay, micro-credit payment.

Virtual currency: In electronic form exist, on the network circulation, with the price and consumption functions such as the non-legal currency, such as Q-coins, bitcoin, Wanli.
I will discuss the two business models in detail in the following article.

With a lot of chatter, the last nine pictures were combined to summon the "dragon":

It is noteworthy that the various business models of internet finance in the chart are divided according to the function of realization, and the existing market participants are gradually penetrating into many fields. For example, although the Lu Jin is a debt-raising platform (Peer-to-peer lending platform), it also has the function of the exchange to provide users with a two-tier market transaction services.