The small age of Internet finance

The current boom in internet finance is just a prelude to the advent of a truly big era.

You're right, it's a small time, not a big time.

In the 2013, there was a steady stream of information about Internet finance: Ali and Tianhong fund launched the "Balance Treasure", Ali small loans and closed-line credit payments, micro-letter payment, Tencent fund supermarkets, Tenpay and the Great Wall securities cooperation to set up a network brokerage, SINA launched micro-blog wallet, Beijing-East force supply chain finance and peer-to-peer ... The internet giants have quickly infiltrated China's financial sector with a low-key and swift gesture.

The traditional financial sector, shaken by the powerful attacks of internet companies, is not outdone. Minsheng Bank shareholders set up Minsheng financial power to promote small micro-finance; Ping An online, Lu Jin, and ebay cooperation staged internet financial combination boxing, China Merchants Bank launched the first "micro-trust Bank", the major funds, insurance companies also opened the network to buy flagship stores ...

A time of various internet financial organizations, circles, only in August China Internet Conference, there will be "Internet Financial Working Committee" and "Internet thousand people will" announced the launch of the establishment. It has been suggested that the Internet financial and commercial banks, securities market two financial models, and listed as the third type of internet financial model, the University of Tsinghua Five, represented by the college also set up an Internet financial laboratory.

Still, the current boom in internet finance is only a prelude to a truly big era-what are the patterns and practices that can really be called "Internet finance"? Are these patterns and companies going through a group-buying shuffle and reorganization? What is the direction of internet finance in the future?

The logic behind

When the financial encounter on the Internet, a silk counter attack began to play.

More and more traditional industries are beginning to realize that the value of Internet comes from users, and the financial industry is no exception. Through the Internet to bridge the huge amount of users, seems to have become a theme of the Times. When banks found that the "28" rule had 80% of the 20% users of wealth, it was difficult to achieve more rapid growth, they began to want to reverse the Internet operation, to pry into the 80% long tail market.

"Over the years, there are many cases on the Internet that subvert the traditional industries, and the financial industry is now talking about the fear of Tencent, and the fear of Ali, in fact they are really afraid of the Internet." Ali Financial Hu Xiaoming said.

First look at the Internet's properties and advantages, first of all, on the large platform to have the online traffic and users are difficult to reach, the second is the effective technology and large data analysis methods, three to reduce transaction costs, reduce information asymmetry, as well as sharing, open organizational form and thinking.

The core of financial institutions can be summed up as three elements, pricing, credit, wind control. Pricing is fundamental, on the basis of pricing can form a credit system, and then attract funds, and through the wind control to achieve capital allocation, to form a virtuous circle.

Jinlin, an analyst with Oriental Securities, believes that internet finance can meet the core pricing elements of finance through large data. At the same time, in the case of surplus financial institutions and lack of financial services, Internet finance through the current long tail passenger group service, will be easy to cultivate customer stickiness, with the scale of the gradual expansion of the traditional financial formation of reverse attack.

Internet and financial collision also triggered a different mode and verification path, on the one hand can use the Internet as a tool to improve the efficiency of traditional financial operation, on the other hand, the Internet technology, large data as the basis for risk pricing, the formation of a credit system.

There are a lot of internet banking practices that can be seen, roughly grouped into three categories:

One is the channel pioneering, that is, the money to make channels. For example, the channel of traditional financial products Internet, the balance treasure is a typical representative, China-created securities, founder Securities in the Cat opened flagship store, sales consulting products, financial advisory services, Guotai Securities set up a network of financial departments, and so on, and some start-up companies, such as melting 360, a good loan network, Through the search engine docking bank loans products and users at both ends of the mobile application of Copper Street is a polymerization of a variety of financial products platform, in essence, still "channel business."

Second, the use of large data to earn data analysis and mining money. "Internet finance can use the advantage of large data mining and information flow to realize the precise positioning and seamless push of customer service, realize the consummation of financing function through information superiority, and supplement the existing financial system." "Guotai Shang Yuming analyst said.

The most famous and unique Representative is Ali small loan. It owns all the trading data of all the merchants within the Ali closed loop ecosystem, based on these data, they can automatically and accurately price their risk, through the Internet data operations, for the Ali ecosystem small micro-enterprises to provide loans, and another atypical example is a U.S. company engaged in Cross-border remittance business Xoom, Through large data analysis of the customer each remittance flow situation, when individual transactions have abnormal changes, the computer will start the alarm program.

Third, the credit risk platform, this model assumes greater risk. But its biggest change the traditional financial intermediary and the currency issue system, the investment and financing function, is closer to the real "internet finance", for example the Peer-to-peer online loan platform which is represented by the letter of credit, the pattern of the naming time and so on.

In fact, for the hot internet finance, there is a lot of controversy. The point of contention is that some people think that over time, internet finance has unparalleled advantages, it will subvert traditional finance, but more people think that internet finance is only the traditional financial system of the use of Internet means, so that the cost of the channel is lower, operational efficiency is higher.

From the above many Internet financial models, Lu Jin Deputy general manager Huang Liming that these do not seem to have "subversive." "To move the traditional financial models and products online, more like a financial channel to complement and optimize;" Third party payment has been done very mature, and need the traditional financial institutions and payment companies to achieve the cooperation between the two sides or complementary relationship, peer-to-peer and public, this is the traditional financial system does not see the business, high risk, It's hard to say what subversive things this business will develop. "he said.

"Where did the great era of subversion come from?" First, technological innovation, the emergence of a new business model. ”

Future conjecture

There is no doubt that "real internet finance" needs more innovation and imagination.

Just as social networking is thought to be the power to change the world, its emergence has dramatically changed the way life, work, interpersonal relationships, and link patterns have evolved. In this extension, is the development of Internet finance available?

So it was suggested that there would be social networking exchanges? This is not groundless, the early days of Facebook before the official listing, on the internet itself once sold "their own shares", many are not Facebook's institutional investors, 800 million of users have to buy its shares-not through the SEC. Of course the result was not allowed by the U.S. government. But, at least on social networks, there is the possibility of forming a stock exchange market.

There are more than one internet finance scenario from social networking. Huang Liming also deduced another future scenario. In a parent-child community, there is an exchange of parenting experiences. One hundred or two hundred of them had babies in the same year. If everyone is advocating 10,000 yuan per person, the money can be invested in relatively stable Treasury bonds and time deposits in return for earnings. More crucially, once one of the children's parents is in an accident, the fund will be funded from the principal or income to ensure the healthy growth of the child. If not, then share the benefits.

This must require Internet companies to provide management and services. The core is that this model is based on a social network organization form, and suddenly crossed the insurance company, but realized the function and value of the insurance company. Products are designed by customers, compared to the form of insurance companies, saving a lot of costs. "If this group of people is a circle of friends, you will not even have the cost of fraud payments." "he said.

If this happens, the Internet platform will completely subvert the insurance system. After that, is not a major disease risk, future pension insurance can also do so? The Internet's large data function, whether it is the incidence of cancer, or the emergence of accidents, will naturally evolve into an ecological, so that these customers to make their own products, is the real internet financial subversion of the existing financial system practices.

Another example is the allocation of resources through the Internet, will save loans, financial management, insurance, these things on the internet to solve, and automatically find the optimal configuration?

Whether the banking industry will meet the following assumptions in the future: the source of the difference between current and fixed deposit rates is the value of liquidity. If an internet company establishes a fund in which the Bank is a term deposit, but on its Internet platform the user is free to transfer the transaction, there must be a large number of current account users running on the Internet platform to enjoy both relatively high returns and liquidity. Is such a model feasible? It would be a bank working for the Internet.

The information processing of internet finance is not complicated, it is through big data and cloud computing. A more idealistic assumption is that every person from birth, all behavioral information is data, and the data stored in the cloud, through the search engine and large data can be queried at any time-it will be a super huge internet financial information base, on this bottom, risk, fraud, illegal fund-raising, default, These issues, based on data and risk asymmetry, will be resolved.

"In this case, the cost of the dynamic default probability is very low, and now the risk pricing of commercial banks will be overturned." The financial transaction costs so high, everyone is looking for default probability. If large data can automatically solve the problem of default probability, the whole transaction cost is reduced, which is also the principle of internet finance. Famous scholar Xie Bold guess.

It is not unrealistic to imagine. Although the Internet financial scale is still small, but it determines the marginal price, once the traditional financial price system has been damaged, will bring great impact.

Of course, overtaking corners requires more preconditions, even unknown regulatory risk. But the internet is more transparent, open, sharing information and sharing methods, as well as the establishment of the Internet credit system, may be born in the gap subversive innovation. And that time, is the Internet financial era of the real arrival.

Internet big Company: Ott effect

OTT, "over the top" abbreviation, the basketball term "pass" meaning. It was later used frequently in the communications industry, describing internet companies spanning operators and directly developing internet-based businesses.

This term, which is often used in a particular industry, has now apparently opened its branches to various industrial environments. Because, like operators, more and more traditional industries are beginning to realize the value of the Internet collection of users. This is how the Internet and finance collide.

Ali Finance has brought the biggest OTT effect. Known as the bank's three core business "deposit, credit, sinks", Ali through Alipay realized the "sinks", the balance treasure realized the "deposit", Ali small loans to achieve the "loan", the middle crossed the bank. The future of the new business "cornucopia" will also be the platform and small banking system through, and Sina Weibo's marriage also accelerated the layout of mobile finance-but across the banks and other financial institutions.

There is an early spread of surplus treasure of income, Ali finance accounted for 95%, and Tianhong fund accounted for only 5%. Such a small percentage of the share of why Tianhong Fund and Ali cooperation? Alipay as the country's largest third-party payment platform, with more than 800 million registered users, daily turnover of more than 4.5 billion, assuming that each transaction turnover time of 5 days, the average precipitation in the Alipay fund scale of more than 20 billion. Through the low threshold, the initial capital of 1 yuan, the balance treasure to meet a lot of silk micro-finance needs. It is said that the current balance treasure amount of funds close to 30 billion, the days behind the Tianhong "add to the Treasure" has become the largest in history and the user's money fund.

In fact, the conclusion is simple: the long tail of the platform economy. This is also the absolute advantage of big internet companies such as Ali in the face of traditional financial institutions. Haitong Securities analyst Dai Zhifeng such a summary, "Ali Financial" platform economic model, increasing the scale of utility and long tail effect, to the customer as the core of the multi-point expansion, the collection of small micro-customers to achieve explosive growth; and the value of the Internet's "Platform portals" and "Master Accounts" is also a resource that financial institutions are dreaming of.

In the future, all industries will face OTT, and these OTT platforms are precisely the resources that these financial institutions need to pull.

Can not ignore the internet big company variables and Jingdong. BEIJING-East supply chain finance, is the Beijing-East for suppliers to provide procurement financing, warehousing financing, clearing before financing, expand financing and other services. Accelerate the overall service speed by shortening the supplier's receivables recovery time. For example, the Beijing-east to the supplier's account period is 40 days. During this period, the suppliers were in a state of shortage of funds, and Jingdong Union Bank made loans to these manufacturers. The latest news is that Beijing East will be involved in Peer-to-peer business.

Although the Internet financial scale is still small, but it determines the marginal price, once the traditional financial price system is destroyed, will constitute a huge impact. Like that year's E-commerce, Jingdong through the 3C category to destroy Suning Gome's price system. Today, major fund companies with Tenpay, Alipay, Oriental Wealth signed a fund distribution agreement, even if the total sales of these channels than the bank, but also will weaken the bank's channel bargaining capacity, more likely to rewrite the banking channel operation business model.

Ott is not the proper term for telecommunications, in any industry, all in the emergence of OTT. While big internet companies may face risks including regulation in the future, financial institutions represented by banks may be marginalized or even replaced if they do not change their mind.

Traditional financial institutions: a platform dispute

Compared with the Internet, the traditional financial institutions tend to build their own platforms in the face of internet finance.

2012, the construction bank launched a "good business" platform, the electric business financial platform covers the Enterprise Mall (business-to-business), personal Mall (corporate), room E through the three business sectors; Bank of communications in early 2012 launched the "Exchange of Bo", is a realization of business-to-business and consumer E-commerce comprehensive platform.

March 2013, Citic Bank launched the financial mall. Mall products include fund products, financial products, credit card products, loan products, payment products, payment to the United States visa fees 6. Citic Bank said that the financial mall is not simply to move the bank outlets, the business to the Internet, but by the electric business model to rebuild, positioning is open-shelf interactive marketing financial services platform.

Recently, Yin Long, deputy director of the former CBRC's innovation and Supervision department, as Chairman of the People's livelihood financial electric business will also be released. What is the livelihood of the electrical business? How do you do it? Yin Long implicitly revealed the direction: People's livelihood financial power to do eco-service providers. Through small micro-enterprises, 5 years to create new financial signs enterprises. There are two directions, one is to change the risk management model. Second, the profit model depends on price sensitivity to be rescheduled. Reform should be driven by market reverse.

The features of the platform are: high initial cost and low marginal cost. Does a traditional financial institution have Internet genes? The traditional big banks have built their own platform through the huge financial and resource strength, and the most important thing is to get more users. To win customers more time, while expanding and operating their own customer base.

Data is also a crucial factor. In fact, the passive situation of banks today is because they missed the perfect opportunity to pay for development in the early years. And now the Third-party payment agencies do not submit the details of the transaction to the bank. If the bank knows the user detailed consumer data, then the bank may recommend the related financial product to the individual user, or recommends the corresponding financing product to the enterprise user.

In this area, opportunities for innovation in financial services may not be in the hands of financial resource masters, often in the hands of data sources. Do not want to controlled, only seek to master more information flow.

In fact, there are more than one way. Some banks that are unable to compete in a platform can also choose a professional market opportunity. For example, August 15, Ping ' An, the peace of the golden sector and ebay signed cooperation, the future of Ping ' an will provide ebay sellers financing options for Internet businesses and financial institutions to provide a platform for cooperation.

For small and medium-sized financial institutions and small and medium-sized Internet enterprises, cooperation is a good way. It is a reasonable and realistic choice for the ping-an bank, which is extremely difficult to own its own online shopping platform, and for ebay, which is extremely difficult to build up its own financial capabilities, to outsource the platform's functionality and financial services to each other.

In particular, Ping An group has more combined boxing. Its Lu Jin is a network investment and financing platform with small and medium investors as its target. and the public Ann Online is peace and Ali, Tencent teamed up to build the first Internet insurance company.

Internet financial spoilers of the catfish effect, it is bound to promote the traditional financial institutions of the guard is surprisingly. But building a big platform is not a model. More opportunities come from specific business innovations. For example, facing the challenge of Peer-to-peer, you can deep into small micro-market, pay attention to differentiated management; For example, in the face of third-party payments, banks can combine their own advantages, exerting force on community banks and so on.

Venture company: Long Tail win

For these startups, without the strength and background of the banks, what logic and opportunity would they have to fight Internet finance? For example, someone to do platform, someone to take risks;

The favorable network CEO Liu Yannan describes the entrepreneurial logic of Internet finance: "First, to improve efficiency; The first stage, such as payment, net silver has been done; the second stage is to do the most things in the simplest way. You are not a bank, it is best to do small business, because it is to meet the long tail of the internet demand. Just like everyone has financial needs, what products are most needed? In terms of risk appetite, there are also monetary funds and microcredit. ”

The same is recommended based on personal microfinance financing projects, and other Peer-to-peer companies, the favorable network recommended microfinance projects all from the country's leading microfinance institutions recommended, improve the safety factor of investment.

Internet finance was also born on mobile clients. Copper Street, a more than "balance treasure" big two days of the app. Its model is relatively simple, much like the "Cat Financial Edition", screening and screening only low-risk financial products, such as money funds, financial risk.

Founder He Jun also admits that the current wealth management products sold on the internet, only one channel, that is, the Internet of financial products, rather than the real internet finance. The future hopes to form a real internet finance, through the Internet technology and platform, the accumulation of certain users, to provide users with non-traditional financial institutions can not provide services.

Not so long ago, a loan platform called 360 had just won a 30 million dollar venture. As a search engine, Rong 360 itself does not issue loans, but the ability to use the Internet to match both users. Its web page concise, business, from the first party is the capital demand, for its matching appropriate loans. Users enter the site can choose their own type of loan, time limit and the size of the capital requirements, after the search will have a number of loan options to choose, easy to quickly compare and make decisions.

All banks have Internet can apply for loans, why melt 360? This low frequency, high unit price category, economies of scale is particularly obvious, a person to apply for a loan, it may not be a year of loans, the application after a year after a financial management, this process is the flow distribution. However, due to the different segmentation of market segments, other loan platform companies may rob users of resources, in the size of users do not have the advantage.

Rong 360 CEO Ye Daqing said that the future does not exclude more financial products involved. "The demand is over there, the same user group, meet his various needs, your loans, credit cards, discounted information, mortgages, car loans, I hope that our future is a super platform of the financial brand." ”

Now in the Internet finance, science and Technology circle the most high-profile, have to say is similar to kickstarters pattern of the naming time.

The idea is to help people with ideas and ideas that lack money and opportunities. Whether the project sponsor has designed a creative product, or wants to make an independent film, or want to hold a musical performance, you can come to the roll call to launch the project, promote it to the public, and receive funding support to complete it.

This is a pattern of stripping creative investment out of microfinance and financing it in a pattern of public funding. The difficulty lies in persuading party A to invest in the niche market for creative projects. At present, foreign similar website kickstarters balance liquidity amount of 10 million U.S. dollars, the inevitable market size is limited, profitability compared with other Internet financial model is lower.

Faced with the risks of policy regulation, the squeeze of big companies and uncertainty, these seemingly impediments have not stopped the accelerating pace of internet financial entrepreneurship. The Internet is fast changing, the success or failure of entrepreneurship is never just from how hard, and how in a time of upheaval before the advent of the homeopathy.