An accurate definition of internet finance

Absrtact: Internet finance, for most people is a relatively unfamiliar term. However, with the continued development and growth of the balance treasure, the market for Internet finance began to have a preliminary understanding, and accompanied by the first Internet insurance company turned out, interconnected

Internet finance is a relatively unfamiliar term for most people. However, with the continued development and growth of the balance treasure, the market for Internet finance began to have a preliminary understanding, and accompanied by the first Internet insurance company turned out, internet finance as if in the spring after the night, become the focus of discussion. So what is Internet finance? What new changes will it bring to the financial sector in the future? To the A-share market will have a profound impact? This paper gives a more comprehensive and systematic exposition.

An accurate definition of internet finance

In short, whether the way the financing is directly or indirectly, as long as the flow of funds is based on internet technology to achieve, including traditional financial institutions using the Internet to improve their efficiency, can be defined as Internet finance, and should not only be limited to third-party payments, online financial products sales, credit evaluation audit, Financial intermediation and other models. Such a definition could encompass the current mainstream view of the market, but clearly underestimated the impact of Internet access on the financial sector and the potential for future development. Here, we prefer Professor Xie's definition of internet finance: The payment is convenient, the market information asymmetry degree is very low, the capital supply and demand both sides direct transaction, the bank, the brokerage and the exchange and so on financial intermediary all does not have the function, may achieve with now direct and the indirect financing same resource allocation efficiency, and in promotes the economic growth, simultaneously, Significantly reduce transaction costs. The core of the definition of Internet financial model is to try to get rid of the role of financial intermediary in the process of capital transfer, and to remove the intermediary structure from the market transaction subject. In an ideal state, internet finance will rely on the Internet's cash technology and share, the open, transparent idea lets the fund circulate in the various main body to reach the direct, the Free State, simultaneously controls the credit risk through the data analysis, the biggest degree reduces the default rate, the financial intermediary role is weakening unceasingly, each individual is one "from the finance ”。 Ideally, the problem of internet finance needs to be solved from the aspect of transmission efficiency to the innovation of risk control, only the internet to achieve the quantification and control of credit risk, financial institutions will gradually weaken the dominant position, otherwise internet finance is a false proposition: Internet companies will replace financial enterprises to become a new intermediary.

Reasons for the emergence and development of internet finance

The internet industry was born in the third industrial Revolution, technology platform and the characteristics of the underlying architecture endowed its powerful connection function, free from the traditional space and time, geographical constraints, coverage, transmission efficiency and timeliness are more than traditional industries have a qualitative leap. Internet technology began to penetrate into various industries, and caused by the integration of the characteristics of the industrial revolution, the industry between the technology, products and services to penetrate and cross, a product or service is often the crystallization of a number of industrial production results, the original industrial boundaries increasingly blurred. With the internet and mobile internet penetration of users and industries and in-depth, the future of the Internet industry and other industries convergence is an inevitable trend, the traditional industry's production efficiency in the Internet technology driven or active or passive promotion, We should also note that the impact of the mobile internet will be faster and more violent than the impact of the traditional Internet.

The demand for financial services from small and medium customers is strong

As a profit-making institution, the traditional financial institutions represented by banks are aiming at maximizing their own interests, units of larger business customers can achieve the same income in the case of efficient staff, property and equipment and other operating costs and wind control costs, profit contribution accounted for higher, financial institutions of all types of resources will inevitably tilt to the big customers , resulting in the small and medium-sized customers of product types, service depth is insufficient. The main business of traditional financial institutions is the high loans, private enterprises, small loans, and small loans in the private demand is huge. According to the Alibaba Platform survey data, about 89% of the enterprise customers need to finance, 53.7% of customers need unsecured loans, financing needs in less than 500,000 of the enterprises accounted for 55.3%, 2 million of the following accounted for 87.3%.

The exploration of asset management to low cost channel

The asset management company represented by the fund company mainly focuses on product design and investment research and development, and has not built channels to face customers directly, and the customers get high cost. Wind statistics show that in the first half of 2013, 72 fund companies to extract management costs of 13.865 billion yuan, to the bank and other sales channels to pay 2.397 billion of the customer maintenance costs, namely, trailing Commission, the overall proportion of the tail commission has reached 17.29%. Under the background of large capital management products will be more and more abundant, channel advantages and bargaining power will be more prominent, how to find low-cost channels is the urgent need of the capital Management company. Asset management company products through the bank and Third-party sales channels for sales, the sales behavior is completed, the fund company can only get the customer name, contact information, product purchase and other simple data, customer risk assessment, asset structure and other key data are in the hands of the bank. Through the cooperation with the Internet company, the fund company starts to face the customer directly, obtains the user's key data, the asset management company may through the data analysis customer demand, develops the corresponding financial product.

Comparison of the advantages and disadvantages of internet and financial institutions

In order to explore the future development trend of Internet finance industry, it is necessary to understand the comparative advantage of Internet Enterprise and financial industry first. Only on the basis of fully understanding the competitive advantage of both sides can we judge the means and possible ways that the two sides can rely on each other in the Financial Internet field, and then judge the development trend of the future industry.

Internet Advantage Internet consumption has become a habit

After more than 20 years of development, China's internet industry has entered a relatively mature stage. Online shopping malls, supermarkets to provide product category and Third-party payment has greatly improved the convenience of shopping, online shopping consumers rapid increase in the net purchase penetration rate from 24.5% to more than 40%, network consumption has become a habit. The current number of large and medium-sized banks are more than tens of millions of users, Ping An insurance company's users have more than 80 million, in absolute terms, the number of users of traditional financial institutions is not small, but compared with internet companies, the number of users is not the same level: the top five of the internet companies monthly coverage of Coverage of Internet users exceeds 90%.

Weak credit endorsement in the Internet industry

From the point of view of the transfer of funds, the transfer of funds is to obtain interest, dividends and other benefits, but the premise is to guarantee the security of funds. If the security can not be guaranteed, or the risk of capital can not be recovered too large, the transfer of funds will choose to give up the transfer, the financing can not be achieved. Online shopping, such as the amount of money involved in small, even if there is a risk, users will not be too much damage. When a large amount of capital or capital needs to flow long, internet companies are still short of financial business, credit accumulation is insufficient, customers are more willing to choose the traditional financial enterprises with higher credit level.

Traditional financial institutions have the advantage of credit brand

The bank is the most traditional large financial institution and the most important management institution of the residential investment assets. Over the years, the bank with a sound, solid operation to bear the country's most important credit intermediary, payment intermediary, credit creation and financial services functions. As banks have a vital role to play in maintaining the stability of the financial system, the State has imposed extremely stringent regulatory and high support for banking institutions, as demonstrated by the bank's endorsement of the national credit for ordinary residents ' savings.

Professional and risk management advantages of financial services

Traditional financial institutions from the emergence of the present, has been hundreds of years of development, withstood the baptism of many wars and the test of the financial crisis, the understanding of the financial business has been very mature. The reserves, risk control and product design capabilities of various financial technologies are already well developed, far from being comparable to internet companies that have just dabbled in the simplest financial business. Internet companies currently involved in the business is mainly the sale of financial products, third-party payments and peer-to-peer loans, these businesses or do not need to carry out product design, or based on system completion, or the business process is relatively simple. The high-end financial business areas, such as investment banking and derivative design, which require a lot of accumulation of financial technology, are inaccessible in the case of inadequate financial technology reserves.

Compared with other financing channels, banks have a very advanced advantage in the management of credit risk. As the most important credit intermediary agency, the bank carries on the detailed due diligence to the financing party, the examination loan main body qualification, completes the Fund from the Fund to melt the party to the Fund integration party transfer. Compared with other Non-bank financial institutions, banks have the most extensive customer information and customer data, in the current indirect financing in the domestic market with the most advanced level of risk control.

The possible development path of internet finance

We believe that the development of Internet finance may be in accordance with the following three levels of progression: 1, the two sides based on their own comparative advantages in their respective areas of advantage to carry out business, product types and key customer overlap is low, Internet enterprises in this stage of the cost advantages play a clear, concrete performance based on the cost advantage of virtual channel expansion; 2, The business of both sides began to fuse, some of the core business cross, Internet enterprises began to use data assets for risk pricing, the traditional financial industry gradually grasp the batch processing technology, starting through product innovation from passive defense to active defense, the contention for small and medium-sized customers is the focus; 3, from the form to the essence of the integration, business model optimization, Innovation, the new business model began to appear, both sides have mastered the other's core technology, the platform has been built up, began to use the platform's data assets to the existing business model transformation, the platform of the number of users, user viscosity and data availability is the key to success.

The first stage: virtual channel expansion

Internet enterprises use financial products to enhance customer service categories, improve customer flow of liquidity; financial enterprises through the cooperation with internet companies, products online sales, reduce costs while acquiring more user resources. The two sides are in the wrong competitive position, Internet enterprises have obvious advantages: the number of users of Internet enterprises, cost control occupy a leading position. Small Micro customer service, which is relatively weaker in banking service, is the best breakthrough for Internet enterprises to enter the financial field, and the homogeneity degree of this kind of financial products is higher, the product supply is sufficient, the sensitivity of customer price is strong, and the cost advantage of virtual channel is obvious. The traditional finance enterprise's cognition to the Internet technology is blank, the study and grasps all need time, the only fictitious channel is the online bank, the credit card mall and so on, the user quantity is few, the experience is inferior. Construction and optimization of the platform, cultivate the user's habits and form a certain stickiness can not be completed overnight, the need for traditional financial enterprises to invest a lot of time and energy. Take the balance treasure as an example, June 13 on line to the end of June, the balance Treasure user breakthrough 2.5 million, the scale of 6.6 billion yuan, as at the end of September, the balance treasure of the scale has reached 55.653 billion yuan, November 15, the balance treasure scale of 100 billion, is the world's largest monetary fund. The rise of the balance treasure is that it captures the huge amount of Taobao users and Alipay financial needs of large, redundant funds to improve the convenience of the user to buy the money fund, reducing the Money fund in the transfer between the different accounts of the loss.

Phase II: Data-driven convergence

Internet enterprises to the existing users of the depth of data mining, based on the design of products to meet user needs; The traditional financial enterprises are also aware of the data value of small and medium-sized customers, grasp the batch processing technology. This stage, the focus of the two sides is the acquisition and development of data, Internet enterprises have completed the user's accumulation, has a certain financial product development capabilities, product design capabilities, to provide a variety of products, can serve the user scale started by micro to small and medium-sized breakthrough, With the traditional financial institutions of the core customer groups began to intersect. After experiencing the first shock of internet enterprises, traditional financial enterprises have improved the understanding and cognition of Internet industry, and accumulated some Internet technology. The data value of small and medium sized customers is valued by reducing the cost of customer service through batch processing technology and moving down the client service group.

Stage III: The winner of the platform is king

Through the development of the first two stages, whether the Internet enterprises or financial enterprises have established a certain scale of user platform, the ability to grasp the financial technology and the application of Internet technology has matured, completed from the form to the essence of the integration. The two sides of the competition are not limited to internet companies and financial enterprises, and Internet financial enterprises are beginning to compete. The contention between the two sides has gone beyond the user and data scale, to rise to the stickiness of the Platform users and data effectiveness, the quality of the platform is the key to winning. The ultimate goal of Internet financial enterprises is to provide users with a variety of financial products, and business activities closer to the data can reflect the user's credit characteristics. It is noteworthy that whether the data is sufficient to the bottom is very important, the bottom means that the platform can contact with the user directly, this can bring a very great benefit: the direct face of the customer, the user's behavior is the most influential; The risk control ability is guaranteed.

Key listed Companies

Oriental Wealth:

Vertical Internet Financial Services Platform Faucet

The company's current financial e-commerce services business development faster, the company's business structure further diversification. With the development of the Internet financial tide and the growing of the company's fund sales business, the income and Jambi of the financial e-commerce business still have a great increase in space, which is expected to become the main source of the company's income in the next few years. At present, the company's fund sales business is still in the initial stage of business development, the company short-term existence of a certain performance pressure, the company's biggest point is the long-term imagination space and future explosive growth potential, we expect the company 13-15 EPS is 0.03, 0.13 and 0.19 yuan respectively. For the scarcity of the characteristics of the Internet platform, the early accumulation of users through the free service, later through value-added services to flow into the current is a universal, feasible business model, the current stage of user size and user stickiness than profitability more important, give "recommended" rating.

Shanghai Steel Union:

Premium templates for Internet financial Services

The main platform of the company focus on business-to-business, warehousing logistics, Internet financial Services online integration platform, we believe that the company is vertical domain Internet companies involved in the Internet financial Services, high-quality templates, data gene construction pricing power and Internet gene construction industry integration advantages, The company will become the steel line of information data, business-to-business, warehousing logistics, financial services, the integration of the potential platform for the ability to become visible.

We believe that the company is still in the platform import period, should not overestimate the new business short-term conversion to profitability, the company is expected to 2013-15 EPS is 0.39 yuan, 0.59 yuan and 0.80 yuan, corresponding p 81, 53, 39 times times respectively. Consider the great platform value of the company's new business and clear potential for liquidity, and give a "recommendation" rating.