Technology
Is Fintech a disruptor or a nuisance?
In recent years, China has developed rapidly in fintech. What will be the development of fintech and the future trends for digital finance in China?
As the first foreign financial institution to raise its stake and take majority control of a securities joint venture (UBS Securities) in China, UBS has been working with enterprises and academies for many years to better understand the latest technological advances, with a vision to create a financial ecosphere adapted for the future.
Tommie Fang, Head of UBS China Global Markets, UBS and May Yan, Head of Greater China Financials Equity Research, UBS were invited to speak at in The Institute of International Finance (IIF) event about Fintech, with focuses on the development of fintech and the future trends for digital finance in China.
Breaking tradition. Technology empowers financial institutions.
Fintech is the combination of finance and technology. Integrated with traditional financial businesses and scenarios, fintech leverages cutting-edge disruptive technologies such as big data, artificial intelligence, and blockchain.
In recent years, China has developed rapidly in fintech. Financial institutions leveraged big data technology to improve operational efficiency and AI technology to provide consultation and services. More importantly, technology has innovated the products and services of the typically traditional financial industry.
Tommie Fang said that technology will be a key factor differentiating financial institutions in the future. Therefore, the core business development strategy of UBS is to build a future-proof digital platform. The pandemic has undoubtedly accelerated the development of the entire fintech industry, including UBS’s digital plans.
"For example, clients have access to hundreds of different types of content via UBS’s latest AI-based digital platform, such as world-class research, macroeconomic commentary and trading views." "In electronic trading, we use AI and machine learning to build new algorithms and multi-dimensional financial models to create more reliable predictions for us.", he added.
Changing the future. Technology reshapes the financial industry landscape
On the other hand, May shared her views on how technology has changed the financial industry.
She said that fintech developed rapidly and penetrated into the payment field, especially retail payments. In China, digital payment occupies most of the market share of retail payment. The tools historically used for payment such as credit cards are gradually losing their place in the market.
As fintech companies enter the consumer lending business, their market share in consumer lending has quickly risen from 20% to 25%. In the investment sector, although traditional commercial banks still dominate the retail banking business, the online wealth management of fintech companies still has great potential for growth. Some of the top fintech companies were given a high valuations, reflecting investor enthusiasm towards them.
The rapid development of fintech companies has brought much pressure to traditional commercial banks and these forces will lead to some inevitable changes. Many banks increased their investment in technology to improve processes such as customer acquisition, user experience, business integration, risk management, efficiency, cost control and more. Digitalization has become the foundation of financial services.
With these new digital trend, financial regulation is also evolving
Regulation is required to keep pace with the rapid development of financial technology. May said that regulators have introduced a series of regulatory measures such as intervening P2P business model, setting a 36% lending rate ceiling, and standardizing cash loan products since 2017.
Recently, some regulations have further strengthened the financial business of technology companies, hurting traditional banks.
"The banks are strictly regulated in areas such as capital reserve and risk management while these fintech companies are not well-regulated. Therefore, a series of regulations have been put in place in order to fight against monopoly, maintain a fair competitive environment, and prevent and control financial risks," May said.
Fintech is constantly reshaping the financial industry. More regulations will be introduced to control fintech development appropriately. UBS will continue to monitor the latest developments in fintech, and to invest proactively in technology development to better serve our clients.
