This is the era of change. Technological innovation upgrades people's life as it never happened before. As such, this is the era calling for innovations. In financial industry, this ancient old profession which has been received criticizes since its born and yet closely related to economic development, what kind of exciting evolution is being carried out? On March 3, Mr. Long Chen, the chief strategy officer of Alibaba's Ant Financial Services Group offered his witty answer of this question, on the event of the 42nd Case Lecture series, the event co-sponsored by Guanghua School of management Case Center and National Center for Financial Research (NCFR) at Peking University.
Having long time teaching experience in Cheung Kong Graduate School of Business, Professor Chen opened his lecture with talking about Adam Smith. He pointed out that the common characteristic shared by an outstanding scholar and a outstanding company is the capacity to study and generalize knowledge in a framework, to communicate and learn from others, and to observe society in depth. Thus, under the current situation, how financial practitioners and enterprises could expand their platforms to a new level?
Professor Chen first confirmed the important role finance has played in the relationship with economy. Finance is the enabling industry, and the key to the supply side reform. It is the bloodline of the economy. A developed economy can only be secured by a developed financial system. Till today, China's financial reform has obtained great achievements. However, hurdles still remained, ranging from residents' lacking of financial awareness, small and micro enterprises's financing difficulties, and imperfect credit system and so on. China's financial situation can be more propertly discribed as financial repression, in terms of indirect financing, distorting toward large enterprises, high leverages, low capital allocation efficiency, limited financial channels, and unsatisfied client experience. On the other hand, under the New Normal, Chinese economy arises personalized and diversified consumption, and miniaturized, intelligent and professional production. It aims to drive employment through full aspects of innovation, and accelerate economcial market orientation and transformation of government functions. This obvious mismatch between finance and economy pushes forward the rapid development of financial reform through Internet, big data, cloud computing and other new information technologies.
Professor Chen Long went on to explain the fresh New Finance idea. He believes that Internet banking is not simply to do financing on the Internet. As the matter of fact, Internet banking has not changed the nature of finance, but put forward a high demand for technical capacity, large data power and professional capability. The essence of finance can only be driven by business and serves business as the return.
The first tailwind of the New Finance is the finance liberalization. Law and improvement of the current system will change the rules and gradually unify the industrial standards. Meanwhile, big data and cloud computing would greatly lower operating cost and customer service costs in financial sector. The development of Internet and Internet of things (IoT) is now changing the consumption and investment scenarios. These new developments are accompanied by a series of changes of interest rate liberalization, deregulation of capital controls, deposit insurance system, big data and credit information opening up etc. All of these changes are making waves for the finance liberalization. Professor Chen confidently claimed that the new economy is driven by consumption and technology, and the new finance is the public finance, inclusive and consumer oriented, that is firmly supported by the new infrastructure. The New Economy needs qualified New Finance. The New Finance needs propeller. As the Internet and finance reach the deep integration, the traditional financial institutions and Internet companies are going to achieve win-win cooperation.
Professor Chen Long then used “Yu E Bao (the balance of treasures”,the Alipay money market product that was launched in October 2013, as an example to elaborate his views on the second tailwind of New Finance, which he termed as technological innovation. As of today, 0.26 billion Chinese people have used Yu E Bao, which proves the vitality of this financial innovative product. The prevailed micro loan difficutly can be blamed on information asymmetry, inefficiency in reaching customers and the lacking of risk identification. The new finance model equipped with Internet, big data, cloud computing and other technological innovation is going to change the way to reach customers and to enhance efficiency of the outreaching. This new trend can be reflected in the users freedom to finance whenever and wherever possible, and further, in the deep fusion of finance and live scenarios, including business scenarios, social and consumption scenes. A nice example of social scene and new finance combination would be Alipay red envelope that brought people great fun and enthusiasm during the just past Spring Festival. Professor Chen asserted that only Fintech, namely financial technology, cannot go far alone. It has to be integrated with life, the so called Finlife, to obtain the long lasting vitality.
The invention of the Internet and the progress of science and technology, in some way, have paved the way for the arrival of consumer sovereignty era, that directly causes the change of business model. Finance is no longer the privilege of the elite and wealth class, but the universal welfare to the public. As said by the 2006 Nobel Prize winner Muhammad Yunus: lending is the basic rights of people. New finance 2.0 is going to realize all great features of liberalization, contextualization, data driving and technical clouding, and even more. With the further integration of the Internet and finance, the term of Internet banking is going to disappear. A great prespective of financial service is to realize the rights for all of people.
Professor Chen then introduced the business development of Ant Financial. He cited the words of Ms. Lei Peng, Chairman of Ant Financial, as the company’s vision: the E-financial innovation is to do micro, yet beautiful, secure, trustable and happy financing, and to help ordinary people and micro busines realize their dreams, instead of becoming money slaves. The rapid growth of the Ant Financial in recent years has fitted the needs of the new technology development in the new finance age
The future of mobile banking will further change our lives, making finance as ubiquitous as the air. New finance emphasizes on user experience and makes efforts to serve long tail group. The success of business needs three wheels in run, as of scenarios applying, financing and networking. The new financial ecology will be cross-border integration and financial frontier further opening up. It is about to be a facilitator of inclusive finance in the new age. Nobel Prize laureate Robert Shiller, expressed his view in an interview with Wen Hui Bao in 2014 : "finance is not to make money. Its existence is to realize the goal of the society. An important characteristic of a good society is about equality and mutual respect and appreciation. In the face of the growing population of the world and the associated demand for the prosperity of life, finance will be the best driving force to achieve this goal. Professor Chen Long in his book Internet Finance: angel or devil? expressed the similar reflections about being the catcher of the finance: pay attention to the service of the real industry, instead of idling arbitrage; tighten up public property with sharing and financial attributes, and do micro and fine finance to reach every corner of the society. Those lines drew a perfect conclusion of the lecture and offered the core idea of Ant Financial.
The case lecture was hosted by Professor Jin Li, Vice Dean of Guanghua School of management, and the director of both the Case Center and National Center for Financial Research at Peking University. The lecture was fully packed with lots of people standing through the whole event. Before its end, Professor Chen Long answered questions raised by the audience, and once again emphasied that the land of finance is vast and there are space for more development. The ants have their advantages of rooting in the crowd of micros. This world doesn’t belong to one person, or to a single company. The rule of survival in this age is to keep low-key and keep in tune. The Ant Financial is earnest to be the catcher and promoter of the inclusive finance, in the way of serving for all of people.
