The golden age of Internet finance needs to see the logic of the future

What I am talking about today is not the product itself, it is mainly about the logic of the future of internet finance, because finance is essential, this logic is clear, can help us understand the future.

First, the future that is understood by China's economic and financial system. Macro perspective How to look at the future of Internet finance? Here first to talk about a book, called "21st century Capital", just began to shelves in China, the book came out of the world after the pursuit of economists, everyone is hot discussion of this book. Why would anyone talk about capital? Because every country, every economic system has a capital, the so-called capital is how to make an effective combination of labor force, to promote economic growth. In this process, the capital and the laborer share is not fair, the efficiency and the fair is the problem which each economy faces, therefore, each country has the capital. Marx would say that capitalists and laborers are bad, and workers will one day get up and bury the capitalists. Piketty (Remark: "21st Century Capital" author) also feel that the capitalist and the old club is bad, so to the capitalist levy heavy tax.

I wrote an article called "21st century capital should be how to write", I talked about China's capital should be how to write, because every country has capital. If we speak of China's capital, we can say that after the founding of the PRC, in the first 30 years of planned economy, the core of planned economy is the nationalization of capital, in order to fulfill its goal of pursuing heavy industry development, capital basically nationalized, property rights policy, abolished the private property rights of the enterprise, in the market policy, abolished the market, monopoly. All resources are tilted to the development of heavy industry by depressing the prices of various factors of production. In the macro-policy, interest rate control, exchange rate control, depress interest rates, depress the financing costs of enterprises, all the resources to the development of heavy industry to tilt, this is China's first 30 years of history.

Then there is a shortage of consumption of the economy, our welfare is very low, China is a very large country between urban and rural areas, in the financial system, SMEs financing difficult, financial consumers can not find investment and financing products are very common existence. China is not a bank, because the financial system is China's national policy of a cash machine, even after the commercial banks, so far, China's commercial banks like the taste of policy banks.

If you want to look at the future of finance, what is the big picture of it? China's economic growth must be supported by financial growth, and finance is like the blood of a market economy. In China after the 18, the future will really release productivity and improve productivity, finance must be a big development. But the status quo is a resource-skewed financial system that won't change very quickly. If the policy of resource tilt is abolished, such as China's financial liberalization, interest rate liberalization occurs quickly, state-owned enterprises can not stand.

This tilt will persist for a long time. Why should I ask this question? This is one of the things that we care about today, and in this day and age, the new technology brings a very big future to financial consumer services. Financial consumers include small and medium-sized enterprises, but also the individual members of the financial consumer, because the resource-skewed relationship, the original investment and financing products are very small, because of new technology, because of the internet, there is a very big future, and the current financial system is not satisfied with this prospect.

Talk about the macro. What does this chart tell us about the future of finance? The figure is about the proportion of GDP consumed by China and the US, China is getting lower and higher, and the United States is getting taller, in the past more than 20 years, the economy of China and the United States is an interdependent economy, the United States is a very large consumer country, or even excessive consumption, and China is a very large producer, Support its consumption.

Because the United States is the largest consumer, China's consumption accounted for more than 30% of GDP, the United States is 70%. In order to support its consumption, the savings rate even to zero, through borrowing, through not saving, in consumption, unsustainable financial crisis. Now the current state of China's economy, why so many industries overcapacity, because the consumer countries have gone wrong, the producer must adjust, we are one of the largest producer.

This is a cyclical factor, in the long run, such a Sino-US imbalance must be adjusted, how to adjust? China's consumption must be greatly improved, the so-called consumption-driven economy, this is our China's future. In the long run, China is a consumption-driven, if you still have money to invest, you should invest in consumer upgrades, service upgrades, experience economy, aging, investment should be related to services, consumption of the entire industrial chain, including logistics, transportation, credit, financial services, the Internet.

Three key words in the nature of finance

If you look at 20, there are three key words: Internet, consumption, finance. Therefore, technological progress, coupled with finance, coupled with the prospect of Chinese consumption, has a very big future.

Let's talk about the nature of finance, and we can see the future. The small loan contract of the Tang Dynasty, which was excavated from the previous Silk Road. There was a resident who received 30 silks, monthly 4 silks from another resident Zo Chongxi, and paid one more silk per month if the interest could not be paid on time.

To sum up, now all kinds of usury factors are in the inside, small loan is a phenomenon since ancient times. Why is there such a phenomenon? This is related to the nature of finance. If we want to know the future of finance, we must know the nature of finance.

The nature of finance can be understood from two perspectives: functional nature and commercial nature. The essence of the function is very simple, the first is to make payment, the oldest financial product is money, then have a credit card, card, bank card. The second function is investment and financing, the money as a travel through time and space conduction, this conduction is often not one-on-one, you have to put money into the bank, and sometimes it is through the deadline, save is short-term, loan is long-term. The third function is insurance.

If you want to know the future of finance, you should understand the nature of its business, three words:

1, financial products are selling products and services. Any kind of business behavior is to provide a product and service, when you provide products and services, must be three things to note, what kind of products? Through what channels to sell products? Is there a brand to sell this product? Any kind of business behavior can not be separated from these three angles. As a result, it is immediately possible to know that the Internet is related to finance. And why? The internet is the first channel of revolution, financial products are not mysterious, or a product, is selling products and services, there are channels of problem, there are product problems, there are brand problems.

2, financial products and general products are not the same, water is a product, financial products and this product may be a little different, not the same place in what? Financial products are not qualitative, financial products would have reflected the risk of business, representing the business activities, it is inherently risky. There is also the risk of choosing a project, in the financial know that the most want to borrow money you can not lend him, because he may take the money past not to you. Another risk is moral hazard, and you may not be able to control it after you lend it to someone. Because of these risks, financial products are not the same as general products, it is a risky product. And this risk is often lagging behind, it will not happen now, it may happen later. Because of this characteristic, we need intermediary to do risk definition, control and pricing, which is the core competitiveness of financial institutions. Upside down, the internet is not only a channel of revolution, another can do is, because of the Internet, with a platform, with information, with data, can greatly reduce this uncertainty, can produce new financial products.

3, financial institutions as an intermediary, the financial products need to do a screening, but the financial institutions themselves are moral hazard, the risk will be an accident? It may be a year or two before I know it. Financial intermediaries also need to be regulated, this is the financial biosphere. In this biosphere, there are financial consumers, financial institutions, intermediaries who sell the product, and regulators. There is a close relationship between the three, if you want to promote the development of finance, the whole ecological circle of the healthy development.

To sum up, three words: financial products are also selling products, products are not qualitative, there is a risk, the body selling products is also moral hazard, need to be regulated. Basically, the most essential thing about the financial biosphere is clear.

Case one: Payment is the chance of overtaking in China's corners

How do we use it? If you want to know how far a financial product can develop, generally speaking, the greater the financial uncertainty will be more difficult to be internet, the less volatile financial products development faster. This is a principle. If you want to know how fast Internet finance can develop? The first question is how close this thing is to business, whether business needs this product, and whether it needs a commercial scene. If you already have a commercial platform, then finance and finance are different, because you have a business needs, it will develop faster.

What contribution can internet finance bring to my product? First, the new Internet contribution to the channel, the original online selling products, is now online. Second, in addition to channels, it can bring new information, this information can help us to identify risks, reduce uncertainty, resulting in new financial products.

I speak a few distance cases. The first example, payment, Internet payment is the fastest growing product for what? Quite simply, it fits the two principles: one is that it is the closest thing to a business, and it needs the internet to pay for it in the age of the Internet. Alibaba has today, with Alipay is inseparable, online transactions need to pay treasure, it developed. Second, the relative uncertainty is relatively small, because the buyer and seller has decided to do this thing, it's not the qualitative is smaller, the only need is convenient and safe, if these two aspects do, it can go to development.

In addition, it is the most closely linked to business. The most closely related to business is the same thing since ancient times. I can quickly mention two stories, such as modern banks, and if you look at the history of finance, modern banks are created because of payments. The first modern bank was the Bank of Amsterdam, in Holland, where the Dutch ship was well built, and many goods were transported to Europe via Amsterdam.

If you have a lot of trade, especially international trade, it must be paid and settled. Because of such a background, the first bank of the modern sense of Amsterdam Bank was born. This bank only does one thing, that is, payment and settlement, has been doing for more than 70 years, by 1683, because of the payment and settlement, the trade in Amsterdam is very developed, like Alipay to do Taobao very exuberant. After that, the Bank of Amsterdam began offering small loans. Therefore, when payment has been made for some time, it will provide other financial services.

Second example, Shanxi ticket. Now think of Shanxi is a resource of the big province, in fact, Shanxi is the former King of finance, because Shanxi from the original border is relatively near, in the name of the time, there is a thing called salt, Shanxi Salt, and on the border, you can do salt trade. After doing trade, will need to pay the support, they have the Shanxi money, 1823 the first Shanxi money-making Chang, then it, first there is trade, and then pay. Shanxi ticket When the last century, all the decline. The reason for the decline, very important reason is that the Qing government itself set up a bank, the settlement and payment took over, Shanxi Bank Bank's core competitiveness is slowly shrinking, coupled with the weak national power, it declined.

China's internet payments are faster than in the West, and I've lived in North America for 17 years, writing cheques for years while teaching in America, and now Americans are writing checks. China's payments are already ahead of the United States, and I sometimes joke that China's internet finance will certainly lead the United States. Because China's internet is not developed enough, China's financial underdeveloped, doomed China's internet finance will be more developed, it is a bit strange, but this is so, because you can overtake the curve, payment is a very obvious example. Accustomed to China's payments, to the United States will find it very inconvenient.

In fact, a lot of internet companies are paying for it, Google has launched Google's wallet since 01, Apple has just launched a mobile phone based on the Apple phone and the ipad, which will be launched next month. This is a very influential thing, and now Apple's slogan is to integrate the payment industry like the ipod integration music. The United States Retail Alliance in the establishment of mobile payment system.

What I want to say is that it is a worldwide phenomenon that internet companies are not financial institutions, so don't feel that only banks can do it, only financial institutions can do it. Internet companies because of the business scene of this platform, make payment is a very natural choice. So, paying is the quickest way to go. In this piece, China is much ahead of some countries in the West.

Payment is important, in addition to the payment itself, but also the collection of data. When we do pay, we know that you pay the habit and information, we can very accurate service. Payment represents two things: data and payment. With this foundation, we can provide more financial services. such as balance treasure. With payment, you can provide other financial services.

Case two: Technology-driven investment bank change

Here's a story about investment banks. There was no investment bank, in 1812, the United States and Britain fought a war, it directly led to the independence of Canada, when the U.S. government needs to melt 16 million of dollars in cash, only 6 million, with 10 million of the gap. There was no investment in the thing, when the businessman in New York, the businessman said to help melt, they bought 10 million dollars in debt.

This is the nature of the investment bank, it is to sell a kind of uncertain financial products, it wants to underwrite, say guarantee can do this thing, and I have channel, can guarantee underwriting. With this example, we find that this thing can be done because you can make a lot of money.

By the time 1864 years, the American Civil War, and the need for money, then he issued a national debt, want to send 20 years, 30 of national debt, the last time because the cost of borrowing is very high, this time to do? There was a new technology for the product, called Telegraph. At this time, there is a small investment bank, a person named Cook said I help you underwriting, I will not charge a very high underwriting fee, I use telegraph way to help you underwriting. First he registered the small agencies in various places and telegraphed them to the country by Telegraph, a revolution in sales channels brought about by new technology. The financial product changed, and it was a very successful one, selling 1 billion of dollars in Treasury bonds and selling it at par, and 100 dollars worth 100 bucks. This is because of technological advances in the financial product changes, he only received a 1 per thousand underwriting fee.

Today's US Treasuries are no longer needed, and the Fed can do it through the web. Why don't you need to invest? The channel is very good, the U.S. national debt is very small, because the United States government is the most reputable government, its products are not uncertain, this time the channel is enough, not to underwrite the underwriting agency. Can see the progress of technology and the transparency of information bring you the revolution of financial products.

Case three: Credit system under large data

The third example is consumer credit. At the beginning of the last century, the way of installment gradually started, we now use credit card is very accustomed to, in fact, credit card is a small loan, and there is no collateral, in fact, it is difficult to do.

In the credit card market before there is no need to mortgage small loans, people have been doing is pawn. You don't need collateral, it's hard to make a small loan, how does consumer credit work? At the beginning of my time, I began to pay by installments. offer a variety of small loans, no collateral, how do I know your quality? So, I need a credit service, we need big data, no big data to do the credit. Including after World War II, the United States has a large number of military veterans, he has a demand for finance, if there is no credit rating there is no way to serve you, in 1956, the United States, the first individual credit scoring company produced, to now is the more authoritative rating agencies.

With the credit base, by 1958, what kind of records can come in, which is the collection of large data. By the year 1958, the first credit card was produced. After the credit card is produced, it pushes slowly, because it costs very high, we do not have enough big data to do the credit well enough, until the 60 's when we have a computer, this time our operating costs have been greatly reduced, which is also due to advances in technology has brought about the development of credit, bringing consumer credits, bringing the popularity of credit cards. This is the relationship between technology and finance. The technological advances bring about financial innovation. In such a context, visa and other credit card alliances have been established.

This is the interest rate for some credit cards in the United States, from 96 to now about 10%, the general default rate of only about 3%, credit card This thing is still very profitable, and credit cards are often big banks do, the larger the basis for data, the lower the operating costs, in fact, is a small loan without collateral, It is based on credit and information, and the processing of credit and information must be based on the development of science and technology. This is the innovation that technology brings to our financial products.

Speaking of a Chinese case, Taobao in 08 only 100 billion of the size, by 2012 to 1 trillion, they catch up with a good time. After 08, China's eastern processing manufacturing industry surplus, while in the west, in the three or four-line city, there is a huge domestic demand for the crowd, on the one hand, there is demand, on the one hand there is production, we picked them up through the Internet, Taobao a few years turned over 10 times times. This is the structure of a domestic unified on the Internet market, through the power of the Internet, China's production capacity and domestic demand to pick up, which is the contribution of Internet companies to China.

If you want to do a good job online, there must be a score, we can see the product, to give enough ratings, do a good job can be done. The same logic, when you do all of this, you collect a lot of information, we can give the business to score, with a rating can do consumer credit, can be small loans, financial products are produced. This is the financial innovation that big data brings.

What's the third point today? The financial history of a variety of products tells us that, first, business development will have a demand for finance. At the same time, technological progress will bring about financial innovation, which will bring new financial demand. What does that mean? You can't imagine consumer credit until a financial product like credit card is produced.

How much internet finance can do in the future, in fact, there is not enough imagination, why? Because this product is not produced, the production depends on large data, we have new technology will bring new financial innovation, its volume can be very large, now may not have enough imagination. More than just the transformation of existing financial products, there may be more demand for finance.

The technological revolution has two advantages: the channels that link production and demand. Because we do things, there is information, there is information can be a letter of credit, with a credit can have financial.

Six major opportunities for financial products

First, financial products. By 2013, the United States would have 60多万亿 U.S. dollars in wealth management products, the family's financial assets only 15% of the money in the bank, the remaining 37% in bonds and stocks, 48% of other assets. Most of China's money is still in the bank, it is relatively small to do financial management. China's current household balance is about 49 trillion, assuming that the money is not just in the bank, but at least half of it is turned into a wealth-management product, at least 20多万亿. There are non-financial institutions, deposits about 40 trillion, assuming that 20% of the money to the Internet, can be turned into internet finance things, about 8 trillion, add up to 30 trillion or 40 trillion of the space. Therefore, financial management in the future is a very big direction. So, if the internet company has a big channel and platform, it is very likely to do a lot of online banking.

Second, consumer credit. By June this year, the Chinese had only 0.3 credit cards, and 1.8 trillion had credit cards in the United States in 2011, each holding 7 cards and 8000 dollars for cards. If each person holds two credit cards, the card worth 1000 dollars, will probably bring about 160,000 yuan demand, than the current 3 trillion double five or six times times, this is very big consumer credit space.

Third, small loans. In China, the general small micro-enterprises, contributing to China's GDP accounted for about 60%, if according to the 2013 figure, contributed to about 30多万亿 of GDP. China is a tilted financial system, and more than 70% of China's loans are skewed to state-owned companies and central Enterprises. Therefore, the general small and medium-sized enterprises, self-employed is not to get how much money, this market is large, if we have enough credit to provide them with financial services, this may be more than 10, 20 trillion of the size of the small loans, it is in the era of technological progress is likely to produce.

Four, insurance. 2013 China's insurance is 1.7 trillion, internet insurance is very small. 1.7 trillion of insurance is rarely on the internet. China's insurance penetration rate is very low, the Chinese people buy insurance is very low, why do we not buy insurance? Because we do not know what kind of insurance should be bought, what kind of things are good. Therefore, this market is also very big. If the Internet, there are trillions of of space.

Five, supply chain finance. The internet age is not a simple consumer, it is now C2B, from consumers to guide retail, distribution, brand, production. This era above and below, one is logistics, one is finance. If we put this supply chain together, the information will be through, so much information can provide supply chain finance, because I have a lot of information, I know what kind of financial services to you, this is a very big piece.

The Internet bank. Tencent's micro-public banks have come down, Ali the previous days the net Business bank also down. Dutch ING Direct Network bank, as the scale expands, the cost is reduced. The cost of customer deposits is very low, compared to traditional banks, it costs less because it does not need to drive a lot of stores. But China's internet banking, in addition to the advantages of channels, but also a very important thing? There is a very large commercial scene, whether it is Tencent's social groups, or Ali's online scene, with this scene, in addition to channels, there are a lot of very accurate information. If done well, China's Internet banks, especially the already-platform Internet companies, internet banking with a platform may also have a very big future, and it's completely different from doing it from scratch because it already has a very large customer base to support it, a lot of information, and a channel advantage.

The golden age of Internet finance

Finally two: first, platform advantage. Internet finance has a future in particular, a company that has a platform advantage. The essence of finance is that it has uncertainty, and who can reduce the uncertainty to a low point. With the credit, you can offer better financial products, a market that is so big that no one is willing to invest. Companies with platform advantages, the biggest advantage is large data and credit. Like Ali, Tencent, you can do this platform to do a bottom, to do the credit, this is the advantage of Internet companies, to this as the bottom, can be with all the financial institutions in the community, with consumers, to do a very different Pu-hui finance. This is the biggest future for the platform company. China is an era of resource tilt, it will not change, if you withdraw money, those will be problematic. Due to the High-tech Revolution brought about by the future of the general financial, there will be very big prospects.

Because financial institutions are inherently morally risky, financial institutions need to be regulated. In the financial biosphere, there are regulators, financial institutions and financial consumers. Financial consumers, including investors, small and medium enterprises, large enterprises and so on. If Internet finance can be well developed, in addition to financial innovation, there is a need for regulators to interact with financial institutions, especially when regulators know that this is a big historical opportunity. Ali is already on the market, and China's bat unwittingly has done the world's top internet companies. Because of China's traditional service underdevelopment, the Internet is underdeveloped, internet finance can go further, our financial regulators should understand this opportunity, regulators and financial institutions together to create the future of the financial sector.

From a macro point of view, China's economic growth, must be the development of the financial system to support, not a developed country is not a developed financial system. However, China's financial system is a backward, resource-skewed, and will not change quickly, otherwise China's state-owned enterprises, the central enterprise will have problems. Therefore, under such a background, the new technological revolution brings the service to the financial consumer to have the very big future. The Revolution of science and Technology, the revolution of channels and the revolution of information, as well as the new products of financial innovation, because of the channels and information brought about by the credit, this is the era of the general financial.

So, if you're going to do a different kind of finance, this is a golden age, and that's my understanding of this vision.

(This article for the Yangtze River Business School vice President Chen in the Ant financial Sharing Day speech full text, business value reporter Liu Yan June finishing)

(Responsible editor: Lvguang)