ZhuangChen super: Internet financial innovation motivation is “deregulation”


according to network CEO ZhuangChen where super speech finishing on 3 w coffee

I almost career is working in the Internet industry, always in the forefront. I believe that innovation and opportunity are in history, Alan greenspan, reference to a passage in the book of “application to find the experience in the history and future, it is innovation opportunity”.

why to spend so much time to do the Internet travel company financial? Actually double history, you will see all the innovation in the history of all: citi bank (Citibank) at the end of bankruptcy, buyout by Travelers Group. Travelers Group is actually very important citi’s shareholders, it is a travel company, it is to be started with travel insurance business; Citigroup is one of the world’s largest bank, he is a very large business related with tourism industry. The second company is American Express (American Express), is the world’s largest travel company, his first product is a traveler’s check (Travelers Cheque), so this is a travel with financial relationship.

the real driving force of financial innovation: deregulation

since 2013, the Internet financial is very popular in China, why suddenly happened at this time? Is the Internet technology and mobile technology to a certain height, or mobile phone, Pad permeability reaches a certain height, so the Internet financial balance treasure, pay treasure to suddenly broke out?

through history, the climax of financial innovation comes from all countries around the world one word – “Deregulation” (Deregulation). The real reason is that China’s financial sector last year began to really “deregulation”. Around 1970, the United States has experienced a huge deregulation, is the American savings-and-loan crisis, similar to China’s village and town bank deregulation, cause they can be large range expansion, on interest rates competition, American financial innovation is a very active at this time.

now why is everybody discussion most P2P is not the raise? Because regulators haven’t deregulation. So far, if you want the raise, the CSRC will be looking for you to talk, deregulation for this part is not yet; Interest rates have been defined in the open, interest rate marketization is a product of deregulation. For P2P current regulation is relatively relaxed, this is the origin of the Internet financial real.

what about under the national conditions in China, the development of the P2P policy risk problem? This can also find the experience from the history, all countries around the world including Europe, the United States, for the social issue financial losses have strict laws to punish.

the P2P recent regulatory thinking is “Qualified investor” (qfii), the concept and hedge funds, namely, if the investor itself have their behavior ability, enough assets and investment experience, and follow certain principles, investment can be high risk investment products, such as hedge funds, P2P. Regulation ensures that two things: first, the less people, assets, the higher; Second, if there is a massive losses, not large quantities of “street”, because “street” let this event from the economy turned into a political issue.

this risk control is actually the phenomenon all over the world, has nothing to do with China’s national conditions. There are a lot of things is not state of the problem, the world any a political body, any one company, the problems in history is constantly repeating, will use the same principle to solve the problem, just name is different, the scene is not the same. So will produce the high risk products, the United States in many years ago on the hedge funds have encountered and solved.

P2P at the core of the problem: to solve the risk control problem

today in domestic P2P many of the problems of how to solve? Some companies do more radical, completely regardless of the regulation, always playing legal careers; But some better idea is to have a similar problem happened in the country, is how to solve such problems. For example: some P2P company is conservative, such as requiring investors’ investment behavior to be monitored, single shot is not too large, must be diversification and so on, I think this is all some good ideas, make the industry more healthy development. I personally is very bullish on P2P, though there will be a lot of risks and challenges in China, but the problem of the solution can completely from other countries, history to find out the solutions.

P2P will meet what is the biggest risk? The United States in the 70 s savings-and-loan a crisis happened in the process of deregulation, the result is a financial disaster, which is then the FDIC (federal deposit insurance company was set up, is to solve the problem of deposit insurance.

before the financial crisis, you save money in the United States, with any a bank account, $100000 is to ensure that the national credit, if the bank failed, national compensate you $100000, in the wake of the financial crisis, the amount of increased to 250000, this problem was caused by deregulation.

why deregulation would cause such a big change? Bank deposits, and is the nature of risk hedge and lending. In the process of deregulation, all the Banks to expand business, will ease lending conditions, such as: the original deposit-taking, pay only ten points, now pay twelve points, can put the money to absorb to come in, in order to achieve rapid enlargement scale. If there are five hundreds of companies on the market for a race, pay higher interest rates, more than those who boldly borrowing, the end result is a disaster. This phenomenon is listening to the familiar, like P2P market? The savings-and-loan open competition is a disaster in the United States, to bring down many Banks, many store pocket money order, the last state intervention. But in the process, there are also many company do big, reason is risk control.

P2P this business is ultimately have the effect, the focus is on risk control. Thus lead to the nature of the Internet financial, the Internet is a tool, it does not change any fundamental questions or provide fundamental solutions, but in the expansion of Internet technology leads to rising, permeability and effective promotion. Even in the past cannot obtain the data to be able to get now. The root of the financial problem is actually a risk control, so we need to ask themselves two questions:

1, “I designed this financial product really changed the risk control?”

2, “is how to change the risk control?”

the first possibility is under the risk of the same reference law of large number, let more dispersed risk. A second possibility in the transaction data, such as relatively popular in the world “special lending engine”, namely, according to the understanding of the data, design the corresponding products, such as jingdong, ali’s supply chain finance, they have the data is a traditional bank cannot master, at the same time, their ability of risk monitoring and traditional financial institutions can’t do. Is included in the tour industry, we also somebody was making the financial supply chain, such as the volume is very big ticket, the potential of a lot of special products.

this concept can also be used to raise and insurance, the travel company like where to go, ctrip has insurance license, we are pushing many special for travel insurance. According to the “data”, our consumers of insurance data interpretation is completely different, understand the situation is completely different, so can give different risk value calculation, so our insurance pricing is also different, even selling way will change too. This is data changed bargain risk judgment, determine the different pricing.

CapitalOne before the age of the Internet business is a very famous company, service is a special high risk of customer base, is the first reference to the concept of big data, to a lot of value at risk analysis, marketing has made a lot of innovation. They served by an American company, the company in the past the traditional computing model is unable to borrow money, but CapitalOne through special means to calculate risk and interest, lend money to the company, can lead to the development of the company has always been a high speed. Today, CapitalOne had been the fourth-largest U.S. bank, but only 15 years old, the big American Banks have several hundred years of history.

innovation opportunity: return to the nature of the business

where is the opportunity of the whole innovation, go back to history, then don’t pay attention to those empty thinking in the Internet, I think the nature of the business is very simple and easy.

what is the nature of retail? Product to complete, the price is lower, faster delivery, no matter any a technology eventually return to the surface. So is the nature of the Internet financial, lend money to people always is high interest rates, high yield, low risk, convenient, the borrower is at the bottom of the interest to be flexible, fast loan, repayment conditions. The key problem is that in today’s scenario you what kind of new technology, new usage scenarios, to extreme environment optimization, rather than focus on the very nihilistic pale green are concept. First principles we carry out the simplest thinking in Internet finance, so as to find opportunities.

I personally think that the Internet financial business is not a winner-take-all, about it can explore from history. Financial industry is the world’s one of the most active industry mergers and acquisitions, and today in such a large traditional financial industry, various brands of financial companies emerge in endlessly, the reason is that is the nature of the financial risk control, the larger the risk control ability is weaker. Financial is a very virtual products, the business is done, will do more and more complex, under “agent cost” is on the economics of people using the commission mechanism, to take risks for some mature transition transition, this is will be generated.

in order to prevent this kind of thing, large financial institutions must be added a lot of layer of regulation. But the more regulation, operating efficiency will be lower, that kind of industry disappeared from the market. Financial sector has a lot of business, first with small companies, big companies to buy into do bigger after may appear some problems, after the government intervention will bring much more regulation, the business would be assigned to the small company to do it. Products such as: resources trading because of the risk is too high, so many governments to monitor large banking institutions deal, stripping off-balance sheet to the resources, and produce a new innovation opportunity, so I don’t think the Internet financial is a winner-take-all industries, as long as in any niche dominance, there are a lot of very, or listing, or mergers and acquisitions. So I think that the industry is full of opportunities and changing.

almost monopoly in the field of retail industry, wal-mart but anywhere in the world all could not say a bank is a monopoly, which is determined by the nature of the financial. Is the key to understand the nature of the industry, ignore the blundering rumors, and to really understand technology, the technology is applied to the scene, a source of problems to solve and improve, to achieve real innovation.