Article China Finance, No.22, 2020

From digital industrialization to digital industry, digital economy will reshape traditional industries.

Every scientific and technological revolution, new technology has to go through two stages, from innovation and invention to large-scale application, and the digital economy is no exception. In the first half of the digital economy, technological breakthroughs were made in basic fields such as information transmission, storage, calculation and analysis, and they were applied and popularized in specific fields represented by the Internet. With the rapid development of digital industrialization, a number of enterprises with leading advantages and scale effects have emerged in industries such as electronic information manufacturing, communication and software services. With the continuous expansion of the application scope of new technologies and the continuous reduction of costs, the penetration rate of digital economy in traditional industries will increase rapidly, and the theme of the second half of the year will switch from digital industrialization to industrial digitalization. Digital economy is not only the supplement and integration of the original economic system, but also the transformation and remodeling of the traditional economy.

At present, China's industrial digitalization is still in its infancy, and there is still a big gap between China and the United States, German and other developed countries in terms of GDP ratio. From the perspective of industrial structure, the degree of digitalization of the tertiary industry is obviously higher than that of the primary and secondary industries. As a medium connecting digital industrialization and industrial digitalization, the Internet takes the lead in empowering traditional service industries, cultivating new formats such as new retail, telecommuting, online education and medical informatization, and presents a rapid development trend. Alibaba, Tencent and other head Internet companies are constantly expanding their business boundaries, building an ecosystem, and gradually infiltrating into the financial services field by using their accumulated massive data and technological advantages. While improving efficiency and promoting inclusiveness, it is also constantly impacting and changing the traditional financial format.

The digitalization of the financial industry has a good foundation, but the transformation has just begun.

The essence of financial services is to use information to price risks and promote transactions. Similar to the Internet, financial services are all information-based "businesses". The informatization construction of the financial industry is almost synchronized with the rise of the Internet. Nowadays, large financial institutions have invested hundreds of millions of dollars in IT every year, established advanced information systems and accumulated huge amounts of data. Taking commercial banks as an example, in 20 18 years, the accumulated data of a single domestic joint-stock bank reached more than 100TB. The financial industry is one of the industries with the most complete information infrastructure and the richest data resources in China. With the basic resources of new technology applications such as big data analysis, it is the easiest to promote digital transformation.

But judging from the development process, the digitalization of the financial industry has just begun. The goal of informatization construction of traditional financial industry is to optimize existing business by using information technology and realize cost reduction and efficiency increase. New financial enterprises use new technology to reshape financial business logic, which is the core of financial digitalization. At present, the transformation of traditional financial enterprises is only a continuation of information construction, a partial optimization, not a complete reconstruction. Internet-derived new finance is merging with traditional finance, which has a good foundation and new finance has found a new way. The combination of the two will surely form a new situation in the digital development of the financial industry.

On the transformation of traditional financial institutions from the overwhelming new force of building cars

In recent years, with the rapid development of new energy vehicles, a number of new forces have emerged. Traditional car companies are also actively promoting the transformation of electrification, but it is still difficult to stop the rise of new forces to build cars. Tesla's market value exceeds the sum of several traditional car companies. Weilai, Ideality and Xpeng Motors have all successfully landed in the capital market, and their valuations far exceed those of traditional car companies. As the two most influential industries in industrial society, automobile and finance are both facing the problem of transformation and development. This paper tries to find out some laws of * * * for the reference of digital transformation of financial industry.

First, no matter how long the history is and how big the volume is, it may be completely subverted. One hundred years ago, Ford invented the world's first automobile production line, creating a production paradigm of modern industry, and the automobile industry is also known as the pearl in the industrial system. At present, in addition to Wal-Mart, nine of the top ten companies in the world are traditional automobile and energy companies, with a total revenue of more than $2 trillion a year. Traditional car companies have been deeply involved in the industry for a hundred years, and now they still earn trillions of dollars every year. However, in just a few years, the new car-making forces represented by Tesla have completely surpassed traditional car companies in market value. This phenomenon will also reappear between new finance and traditional finance.

Second, the change of core business logic is the fundamental reason why new forces can challenge traditional enterprises. After years of process accumulation, brand automobile manufacturers have established high technical barriers in core technologies such as engines. However, for new energy vehicles, motors have replaced engines, and traditional manufacturers have lost the "moat" and stood on the same starting line as the new forces that build cars. More importantly, new energy vehicles have changed the positioning of traditional vehicles as a means of transportation, promoted digitalization on the basis of electrification, continuously improved the design and manufacturing level of automobiles, and met the personalized customization needs of consumers. Using machine learning, constantly improve algorithms and models, and gradually realize advanced intelligence, including autonomous driving, so that cars can become artificial intelligence assistants in travel. Therefore, the electrification transformation of traditional car companies only replaced engines and gasoline with motors and batteries, and did not change the positioning of cars. As a vested interest, subverting the status quo means changing your life. Traditional car companies have neither motivation nor ability. Therefore, this transformation can only be confined to individual departments, and it is difficult to implement it in the whole company. On the other hand, entrepreneurs mostly come from the Internet industry, adhere to the Internet thinking, are not bound by vested interests, and establish an organizational structure that conforms to smart car manufacturing. Back in the financial industry, there is a similar situation. In the era of digital economy, data has become the main factor of production and will replace capital as the core asset of the financial industry. The business logic of traditional finance is "customers looking for money", capital is scarce, financial institutions dominate, and the core of risk control is prevention. Only by providing credit enhancement measures that meet the requirements of financial institutions can customers obtain financial services. The business logic of new finance is "money to find customers", and risk control emphasizes trust. Only on the basis of massive data and in-depth scientific and technological analysis can we accurately find the customers who need the most money and have the ability to pay back the money at a very low cost in the future. New financial enterprises are born out of the Internet, and use the massive data generated by the Internet ecology to continuously optimize and upgrade the risk control model. Now they have taken the lead in the field of financial services for consumers and small and micro enterprises. The next three to five years will be a period of great development of industrial internet, and new finance will inevitably enter the industrial field, which will have a huge impact on traditional finance. This process may be faster and more violent than the electrification of the automobile industry.

Of course, there are some differences between the two. Financial business is a highly regulated industry, and new financial enterprises need the consent of the regulatory authorities to carry out related business. The digital transformation of the financial industry may not be as subversive as the automobile industry, and it is more likely to choose the gradual path of cooperation between the old and the new.

Some thoughts on the digitalization of financial industry

First of all, the digital transformation of the financial industry must be planned as a whole. The financial industry plays an important role in China's economy. The assets of the banking industry alone have exceeded 300 trillion, which is three times the GDP of China. If systemic risks occur in the financial industry, it will have serious consequences for the national economy and social stability. In the face of the rapid development of new finance, the regulatory authorities should consider the risks and needs of new financial development as a whole, formulate overall plans, give consideration to new financial enterprises and traditional financial institutions, encourage both sides to learn from each other's strong points and cooperate closely to steadily promote the transformation and development of the financial industry.

Secondly, the supervision of new financial enterprises should adhere to an inclusive and prudent attitude. On the one hand, the rapid development of digital economy in China is inseparable from a relatively relaxed regulatory environment. In the early days of Internet development, the government adopted an inclusive and prudent supervision mode, which objectively reduced the data collection cost of enterprises, accelerated the formation of platform enterprises, and promoted the innovation and maturity of business models of new financial enterprises, thus giving birth to a number of competitive new financial platform enterprises such as ants and micro-crowds. On the other hand, financial risks are contagious, so the government should be cautious about financial innovation involving public interests, identify risks similar to P2P as early as possible and respond quickly to prevent local risk events from evolving into systematic financial risks.

Third, the traditional financial transformation needs to be strengthened. Recognize the essential difference between new financial services and traditional finance, actively change ideas, explore new business by using their own advantages, and change from a passive "imitator" to an active "innovator". Of course, considering the excessive business volume of traditional financial institutions, it is difficult to achieve comprehensive transformation from the perspective of preventing systemic financial risks. Therefore, we can consider splitting up specialized institutional departments, developing new financial services, and realizing self-innovation within institutions through "starting a new stove", which is conducive to breaking the traditional convention restrictions in system and implementation, and is also conducive to "risk isolation" in terms of risk independence from traditional subjects. After achieving remarkable results, the traditional business will be gradually loaded into the new entity, thus realizing the steady transformation of traditional financial institutions.

Finally, I want to talk about how financial supervision views the balance between innovation and risk. The emergence of an innovative business may optimize the existing business, but it may also bring unpredictable risks. From a sound point of view, regulators will certainly be more cautious about innovative business. However, we should also note that the era of digital economy is coming, and traditional financial services are increasingly difficult to meet the needs of economic development in the new era. The real risk is that finance is divorced from the real economy. Therefore, the regulatory authorities should tolerate the risks brought by financial innovation to a certain extent, especially in the digital transformation of the financial industry. It is the tolerance of supervision that will produce a number of world-leading new financial enterprises in today's China. Innovation in line with the direction of industrial development will not only generate risks, but also generate greater benefits. The regulatory authorities should balance innovation and risk, tolerate and encourage innovation under the premise of controllable risks, and promote better and faster digital transformation of China's financial industry.