How to develop Internet financial subversive innovation

China's Internet financial innovation, is a difficult to read the innovation, in order to facilitate discussion, can be defined and understood from three levels:

On the first level, we can subvert the innovation of traditional finance, for subversion, whether in China where the financial system is not fully developed, or in the developed world.

The second level is the innovation under China's specific policy environment, which is the innovation of restricting factors such as using Internet to break through existing policy, system, legal system, market structure and so on.

The third level, the purely technical innovation application, is to improve the operational efficiency of the existing financial industry, and it is almost the same as the financial Internet, but the initial direction of the integration of the Internet and finance is different.

Internet Finance and financial Internet

The significance of Internet finance and financial Internet is that if we agree that the Internet is subversive to traditional industries, the subversion of finance must come from internet finance rather than the financial Internet, which regards the Internet only as a new technology. Because the traditional financial industry can not change their industry perspective, not from the spiritual level to accept the Internet free, equal, open revolutionary. A recent article by a major former president on internet finance has clearly revealed its own insurmountable limitations. And the cooperation between Tencent and peace fell through, not only to eliminate the Internet companies trying to merge and then subvert the traditional financial idea, may also break the traditional financial attempts to use Internet technology to consolidate their status fantasy.

The multi-party wars between financial firms, internet companies and financial and internet companies have begun. In any case, the definition of subversion, AOL can buy Time Warner, Tencent can have the ambition to buy peace, because the size of the bank's assets and the value of the ceiling. However, to subvert the traditional finance, the Internet needs to understand the essence of finance more deeply, to deconstruct the logic of financial existence from the angle of Internet, and to reduce the cost of trial and error from the lifeblood of finance.

Internet companies are not necessarily as internet-minded as their leaders have trumpeted. In the domestic three major financial internet giant bat, Ma Yun although seems to have a good understanding of the spirit of the Internet, but the bones seem to remain the ancient emperor thought. Although Ma Yun from the solution to the problem of the payment of electricity dealers, is gradually formed including Alipay, Ali small loan, balance treasure and the legendary Ali Bank of Ali's financial system, but I would like to put an own internal speech editor published, but also seriously imitate the founding leader to hang "Red Flag publishing House" name of the Little Man, It is still difficult to connect with speeches that describe the good spirit of the Internet. Looking forward to the subversion of Ma seems to have some kind of paradox.

From the beginning of our article on the analysis of three levels of innovation, Alipay is only a third level of technical innovation, may grab the existing financial institutions cake, but it is impossible to subvert the foundation of financial existence. It is the balance treasure derived from Alipay, although under the current financial control background also need to rely on the Tianhong fund licence, only then may use the Internet technology to sell the money fund, but through the policy of interest rate marketization, it will undoubtedly greatly accelerate the pace of diversion of savings, impact on the existing banking system liquidity. If over time, the balance treasure can be further integrated into the resource allocation of the Internet process, may be a real subversion of the traditional financial industry.

Second, the Internet subversion of financial reasons

The core of the Internet is open sharing, equality and pluralism of democratic spirit, cloud computing, cloud storage and mobile network technology to each individual full participation capacity, digital, virtual community information aggregation has real-time to achieve the financial business needs of information collection and processing potential, The network search and directional push function of the information can realize the point to point flow of information according to the need, and the mobile intelligent terminal and the IoT technology combine the person and the thing perfectly. All of this is a combination of the possibility of subversion of the traditional financial sector, because the financial industry is the reason for the existence of, in addition to pay, more important is the allocation of resources. Regardless of the payment or allocation of resources, the core function of the financial industry is specialized information collection and processing, that is, specialized data and models.

The core of financial industry Analysis: In layman's parlance, the financial industry is a fictitious economy, different from the tangible economy that can be seen. Traditional industry Analysis of logistics, information flow and capital flow in the financial sector has become somewhat unclear, because in the digital financial system, these three flows are actually information flow, different kinds of message. If we have to borrow the traditional industry analysis framework, we can see the financial industry as a traditional business, the traditional industry logistics is the financial flows of finance, the traditional industry funds flow can be interpreted into the financial sector of the risk flow, as the traditional industry, as the capital is the value of goods reflected, The risk of financial industry is the value embodiment of capital. Information is information, and there is only a difference between the traditional and financial sectors.

Three aspects of traditional finance from the perspective of Internet

The author recently visited the bookstore to see Professor Huangda's "Finance", clearly marked as the Chinese financial professional textbook "Money banking" of the inheritors. It is the core textbook of finance speciality in universities before China Open capital market. It can also be seen that China's initial finance actually contains only the most basic currency pricing and payment functions, people's deposits are only supporting the national economic construction of the obligation to save, not directly involved in the financing, and this is the core of financial allocation resources. In this sense, the Internet financial most lively third-party payment is only for the convenience of Internet transactions, to solve the complexity of the multi-agency payment tool set up a kind of intermediate network account, is called an innovation, is not subversive, because it does not touch the fundamental core of finance.

On the financial resources allocation function, from the internet point of view, can be from the following three levels to analyze the specific elements of finance, or financial institutions exist logic:

Pooling of funds and diversification of investment. Financial institutions are dispersed by enterprises and individuals of idle funds together, through a combination of different ways, configured to the need for capital enterprises and individuals. It involves the combination of fund quantity, time limit, risk pricing and other factors, according to the different intermediary functions of financial institutions, there are direct or indirect financing, different financial products of different risk characteristics.

Information collection and processing. On the capital side, financial institutions need to evaluate the investor's risk appetite, namely KYC (Know Your Client). At the asset or project end, you need to evaluate the project risk and risk pricing. The massive information and the processing ability is the financial institution's precious wealth and the core competitiveness, is also solves the fund supply and the demand side information asymmetry question key. Technically, the information processing in the financial industry is data aggregation and model operation. The model represents the economic principles and financial logic of various mathematical statistical operations, and is an approximate simulation of various complex relationships in the real world.

The risk of trading and earnings matching. Finance in the final analysis is to get the right funds to find the right project, that is, the risk appetite of the funds to match the corresponding return, and through the decomposition and merger of complex risk relationships to achieve risk hedging, transfer and trading. It is not a resource allocation that only exists in the administrative resource allocation under the planned economy system, or is intentional misleading or fraudulent.

Different types of financial institutions, such as banks, brokerages, funds, insurance and trusts, have similarities and differences on these three levels. Resolved as follows:

Commercial Bank: The fund collects to the bank as the bank debt, the Bank is responsible for the information processing decision capital investment, the bank undertakes the overall risk, the depositor only undertakes the bank bankruptcy risk. There is no direct connection between the depositor and the credit client, which is not directly related to the funds, information and risks, so it is called indirect financing.

Investment bank: Equity or bond financing, the broker is only the intermediary, the financing side and the investor's funds, information and risk are directly related to the intermediary only to provide referral services, investment risk entirely by the investors themselves, so called direct financing.

Indirect financing of commercial banks and direct financing of investment banks are divided into two extremes at three levels of capital, information and risk. Other financial institutions are making some kind of change in these three areas. such as the Fund, is similar at the financial level to commercial banks, while at the information and risk level similar to investment banks. Trust forms are relatively flexible, but they are also adjusted at this three level. Insurance is referred to other experts for further discussion.

Iv. possible ways for Internet to subvert finance

The Internet innovation that really can subvert traditional finance at the first level we call should be from the core elements of financial existence, that is, the aggregation and diversification of funds, the collection and processing of information, the transaction of risk and the matching of income, or some combination of these three levels, Find ways and means to completely or partially replace the role of traditional financial institutions and professionals in Internet technology. Technology innovators understand financial logic in the technical language, presumably, from where to collect what data, need to go through what model to deal with, in what way to send to who, the purpose is to allocate resources to the parties to decide the necessary information, timely, accurate and comprehensive.

Specifically, from the Internet to find the existing financial institutions from the counter business, credit approval, IPO, asset management and other processes collected information, and the way the internet processing and transmission. At the end of the fund is the processing of information about the preference for capital risk, where the asset or project side deals with the related risk-benefit information according to different asset classes. In portfolio management, it is the quantification and correlation information of risk. With the Internet and cloud technology, the required models no longer need to be as prison as the current financial institutions in the development and industry of repetitive input, as long as their own team of experts responsible for parameter maintenance and limitations of interpretation can be.

The innovation of internet finance in China is similar to the Internet in other fields, and there is a general lack of original innovation. Even winners such as Alipay are starting out by imitating existing technologies and patterns abroad. Just like Baidu in Google, Tencent QQ on MSN, Alipay in PayPal, all loans to Zopa. It is not without merit to start from learning foreign models, and then to search for imitation innovation in China's best way of landing, but to achieve subversive innovation around the world, the Internet technology can only penetrate into the core and essence of things. In this sense, China's Internet in the financial field of subversive innovation has an unparalleled advantage in some other areas, because the financial monopoly must occur at the core of the financial sector, the efforts to break the monopoly is likely to be the most subversive attempt.

However, the more subversive also may need long-term input, from the point of view of project operation, perhaps the combination of the length is a realistic choice, short-term can see the benefits to make up long-term investment. So, in addition to having a large amount of initial capital investment projects, disruptive innovation may be in the seemingly insipid but can be a quick profit of the project derived from the premise that the project team has the ability to understand the nature of the financial experts, and preferably from the beginning can be with the technical team to explore, at any time to grasp the direction of progress.

V. The possible forms of Internet subversion of finance

The democratization of finance. After economic monetization and asset securitization, financial activities can be realized more efficiently by digital technology. The professional nature of the traditional financial functions will gradually fade, the distinction between elites and the public is eliminated. As automatic files eliminate the difference between professional and amateur drivers, digital SLR bridges the distinction between professional photographers and amateurs, and Internet technology will eventually dilute the arbitrariness of the financial profession and allow the public to have more autonomous capabilities. Individual investors in the stock market have already begun to practise their democratic right to vote with their feet.

The organizational form of financial institutions. The internet is redefining the way people interact, social networks let "the world is flat" no longer just slogans, the end of the world, if the principle of management is bound to adjust accordingly, the organizational form of financial institutions is doomed to change. In fact, in recent years, foreign financial institutions in the centralized and decentralized management, the former in the background of the process setup, business innovation and risk management of the integration and balance in the constant exploration and try. Vertical management of delegated authority may gradually turn to decentralized functional checks and balances and monitoring, and vertical decision chains evolve into horizontal committee deliberative decisions.

The physical form of financial institutions. From the phone bank to the Internet bank to the mobile bank, the sale of financial products and services is gradually getting rid of the counter manual and ATM teller machine, "financial media" is not only at the industry level no longer need financial intermediaries, but also at the operational level no longer need human intervention, ATM also toward the direction of smart phones evolved. The physical presence of financial institutions will gradually become virtual, and perhaps banking will soon be able to slash property spending.

The business processes of financial institutions. Changes in business processes in addition to coping with technological progress, more of the financial industry under the changes in customer relations, product development, information integration, risk control and so on will be the business process to put forward new requirements, and financial institutions of the Organization, physical form to change together. The experience of spending half an hour at the counter to Exchange Forex is by no means a cry for raising service awareness and level can become history.

Standardization and personalization of financial instruments. From the technical realization of the general sense, the higher the standardization of products and services more conducive to the realization of network transactions, so the first E-commerce is the books, electrical appliances. However, when we no longer regard the network as a traditional industry channel change, but the network as a new way of survival and interaction, online and offline fusion (O2O) is the general trend, offline personalized experience and online standardization transactions can be compatible. Moreover, the network cloud storage and cloud computing, information search and push, so that personalization is no longer the antithesis of standardization, the traditional Personalization and standardization of the two-yuan confrontation may be in the Internet finance will no longer exist. An investor may be able to tailor a unique debt product to the issuer privately.

Vi. The Chinese characteristics of Internet subversive finance

Our basic State policy or the guiding ideology of reform and opening-up has always stressed the Chinese characteristics, natural any so-called innovation can not ignore this topic. As we believe the Internet to subvert finance has a worldwide commonality, we also believe that there must be some kind of Chinese character born in the world. So what are the characteristics of Internet innovation originating in China's financial industry?

Break through the financial monopoly. Finance in the world is not a casual access to the industry, strict access threshold is to protect the national economic system and the public interest of the sharp weapon. However, even the "too big to fail" financial giants can only enjoy the advantages of the natural monopoly, relying on the government's administrative power to enjoy the monopoly of the industry, I am afraid that no one can be China's financial industry state-owned institutions of the right. The government is both an athlete and an umpire, and the administrative approval replaces the industry admittance. The door to China's financial sector has been ajar, and the government is opening up only at a point when it needs some kind of salvation, such as opening up stock markets to save state-owned enterprises, allowing small lenders to dissolve the risks of big banks, and so on. The internet to the rush to break through China's financial monopoly of private capital a technical means, in the regulatory gaps found a possible entry point, the rapid growth of the government and state-owned institutions startled, surprise hesitates has lost the best response time. Alipay and other Third-party payments is a breakthrough in the traditional system of bank payment excellent case.

Solve the credit problem. Insiders say the financial industry is a business risk, credit is the cornerstone of finance. However, in a social and economic environment in which the Government, enterprises and individuals are lacking in honesty and credit, technological innovation has also inadvertently partially solved this credit dilemma, and the intermediary credit guarantee of the third party payment platform makes the buyers and sellers of the electric business no longer worry about each other's credit, The Internet technology realizes the escrow account function of traditional banking business lifting. Of course, this also proves that technology can not understand the financial when the user experience to discover the innovation point, but also may have to go through a higher cost of trial and error.

Integration of industrial chain. If the European and American developed countries in the financial industry, there are immoral elements, reasonable and unreasonable, then the Chinese financial industry profiteering is more derived from the institutional monopoly status, both inappropriate and unreasonable. One of the secrets of foreign banks ' profitability is a lifelong one-stop service for customers with a complete chain of financial products to choose from. China's financial industry from the beginning is to serve the country's construction, reform and opening-up is mainly to solve the financial problems of state-owned economy, the division of Business, Administrative examination and approval, the monopoly of state-owned financial institutions caused the financial products incomplete and market segmentation, The depth and breadth of market allocation resources are far from the level that private capital hopes to achieve. The technological advantage of Internet finance will be in the digital age to play a great industrial integration ability, a mobile phone can meet a person from birth to death of all financial needs is no longer impossible.