Current Status of the Development of Internet Financial Industry
(I) Imagination of Internet (Mobile) Finance
Unprecedented and emerging new financial services make information and resources more symmetrical, enhance transaction efficiency and matching, and make financial services more inclusive and accessible to the public. In 2014, the internet financial industry became even more imaginative, no longer limited to various XX Bao products or P2P lending, but incorporating more innovative practices such as asset securitization and the online trading of securities. Moreover, these services can be provided from the outset through mobile apps or WeChat public accounts, making them more lightweight and vertically segmented. In 2013, there were 360 financial companies, and by 2014, this number had grown to 900, an increase of 150%.
(II) Policy Regulation and the Risk of Default
In 2014, the internet financial industry was characterized by "action before policy," with the entire sector rapidly developing before clear policy guidance was established. The lack of defined boundaries between grey, red, and green areas may pose the greatest risk. However, since internet finance began to be included in government work reports, several draft regulations were released by the end of the year, such as the "Interim Measures for the Supervision of Internet Insurance Business (Draft for Comments)" by the China Insurance Regulatory Commission, the "Private Equity Crowdfunding Financing Management Measures (Trial) (Draft for Comments)" by the China Securities Regulatory Commission, and new regulations on Bitcoin and third-party payments by the People's Bank of China. This indicates that the government is gradually standardizing and regulating the industry at the policy level.
Advertisement
(III) "High-Net-Worth, Handsome, and Educated" Participants in Internet Finance
Previously, it was said that the threshold for entering finance was high, but once you're in, you'll find that despite the high barrier to entry compared to other vertical industries, participants continue to flow in. More and more "high-net-worth, handsome, and educated" individuals are entering this field, with players being very diverse. It is said that venture capitalists (VCs) have to put in significant effort when conducting background checks on internet finance entrepreneurs. Most of these companies are pure start-up projects, but some also come from banks, securities firms, small loan companies, and newly established businesses from listed companies in the financial sector.
(IV) The Continuous Surge of Capital Power
The year 2014 was a year of investment explosion in the internet financial industry. There were 59 investment events in 2013, and by 2014, this number had risen to 195, a 230% increase. The investment entities were also very diverse, including domestic and international VCs, large companies, securities firms, and A-share listed companies. Some funds have paid particular attention to internet finance, and have laid out their investments in many sub-directions of this field, including IDG, Sequoia, Source Code Capital, Shanda Capital, and China Growth Capital, among others. Even angel funds specifically focused on internet finance have emerged, including Tao Shi Capital and En Wei Capital.
(V) Great Abundance of New Companies and ProductsFinance is a vast market, and each subfield combined with the internet has the potential to generate companies with significant market value. Unlike 2013, which focused on P2P lending and XX Bao financial products, new internet finance companies in 2014 became more diversified. Lending began to be segmented into P2P, P2B, auto loans, mortgages, education loans, and debt transfers, among others. Wealth management also became more diversified, moving beyond simple channels or the "Qu Na Er version of wealth management," with many asset securitization and margin financing methods emerging. Payment, crowdfunding, and credit reporting companies were also very active in 2014. Additionally, methods that integrate finance with mobile apps, WeChat public accounts, and people's social relationships have increased, with the most typical being crowdfunding like "Qing Song Chou."
The future development direction of internet finance is mainly reflected in the following aspects:
(1) Mobile Payments
The rapid popularization of smartphones has spurred the development of the huge mobile payment industry. As a major internet country with 1.08 billion mobile phone users and 420 million mobile netizens, mobile payments have the potential to revolutionize traditional commodity transaction models.
One of the major financial functions realized by the internet is mobile payment. With the use of mobile devices such as smartphones and iPads, as well as the application of online payments like Alipay and Tenpay, people can make online payments anytime and anywhere. Alipay has firmly grasped customers and ultimately gained recognition due to its convenient and fast payment method. In addition to Alipay, more and more third-party institutions are entering the payment market. The third-party payment market is growing rapidly.
In the era of mobile payments, it is essential to achieve multifunctionality of accounts, integrating services such as shopping, payment, and investment management. Only accounts that provide the greatest convenience to customers and generate strong stickiness can achieve the goal of locking in customers.
(2) Big Data Analysis and Mining
With the rapid development of data terminals and platforms, big data became the hottest topic in the technology industry in 2013. Relying on emerging big data analysis and mining technologies, extracting the value of data from the vast data of existing data platforms and providing data analysis and mining services can help companies explore in improving the precision of marketing and advertising. The seemingly exponential growth of big data, which appears to be a burden, is actually invaluable. By using advanced tools to mine and analyze data and refining and analyzing user behavior patterns, companies may be greatly surprised in discovering new business opportunities and expanding their businesses.
The application and development of mobile internet, the diversification of the financial industry's overall business and services, the expansion of the financial market's overall scale, and the improvement of the financial industry's data collection capabilities will form a continuous and dynamically changing financial big data. This includes not only user transaction data but also user behavior data. Analyzing financial data can quickly match the financial product transaction needs of both supply and demand parties, discover hidden information and trends, and further discover business opportunities.In the financial sector, an increasing number of institutions are fully leveraging big data analytics. For instance, Alipay's microloan company utilizes transaction data to provide credit assessments, which are then used to issue loans to clients applying for them. Investment experts on Wall Street have already begun to predict market trends by mining data, such as selling stocks based on the public's sentiment index and hedge funds analyzing corporate product sales by examining customer reviews on shopping websites; banks infer employment rates based on the number of job postings on job-seeking websites; investment institutions collect and analyze information on listed companies to detect signs of bankruptcy.
McKinsey, in a special research report titled "Big data, the frontier of the next round of innovation, competition, and productivity," suggests that "for businesses, the use of massive data will become the foundation for future competition and growth."
(III) Online and Offline Interactive Marketing
With the application of the internet and the emergence of new business models, new ways of financial services will be stimulated to emerge and develop. Recently, the online-to-offline (O2O) model, which is essentially a new type of business model that interacts between online and offline, has garnered widespread attention on the internet. In the past, there were two distinct worlds: the traditional retail businesses of the real world and the internet businesses of the virtual world. The new O2O business model, which integrates the virtual and real, will drive the emergence of new marketing methods, payment, and consumer experience methods.
In 2013, mobile internet is expected to accelerate its penetration into users' lives, and the O2O model effectively combines online information resources with offline physical resources, focusing on users' lives and paying attention to their segmented needs. Mobile O2O lifestyle services are expected to achieve significant development in 2013. For example, by downloading an app on a mobile phone and sending a taxi-hailing request, the nearest taxi will come to you, and the fare and payment can be automatically completed through mobile payment. After the transaction is completed, evaluations can also be used to promote service improvements. The rapid popularity and application of QR codes have made the O2O model more convenient. By scanning a QR code with a mobile phone, you can directly enter the full page of product information and complete a one-stop transaction activity for procurement and payment.
Compared to traditional retail industries, financial services are more easily adapted to the online and offline interactive business model. Most financial service products are virtual and do not require physical logistics transportation, avoiding issues such as logistics loss risks. For example, using QR codes for marketing promotion will greatly enhance the directness and reach of marketing. It can be imagined that each financial product is equipped with a QR code; when a client is highly satisfied with the company's asset management product and is willing to recommend it to friends, they only need to let their friend's mobile phone scan the product's QR code to directly enter the product page for detailed understanding and ordering payment. Other customers' evaluations can also be displayed directly on the product page for reference when purchasing. In addition, customer surveys can be conducted through scanning QR codes and clicking to submit. Compared to previous methods such as telephone and street research, this method will greatly reduce research costs, and the customer identity information displayed on mobile terminals makes the research process and results more reliable and effective, and the solutions are more targeted.
(IV) Large Platform Utilization
Establishing a payment system and a large trading platform to enable investors to achieve self-service investment, financial management, trading, and financing, and other one-stop financial service functions on the platform, may be the ultimate goal of most financial institutions.
For example, the globally popular Apple company is a typical successful case of platform utilization. One of the key factors behind its success lies in building a business platform - the App Store. It removes all intermediate links, allowing developers to directly publish applications to end customers. Revenues are shared between developers and Apple. Domestic companies like Taobao and Tencent are creating powerful platforms to maximize platform economics.
In the use of large platforms, the core value is the autonomous optimization of resource allocation. A large amount of supply and demand information is aggregated on the platform, forming a "full transaction possibility set" under conditions of symmetric information and extremely low transaction costs. For example, the intersection and allocation of capital supply and demand information make it easy to solve issues such as financing for small and medium-sized enterprises, private lending, and personal investment channels. For securities companies, the internet is first and foremost just a channel to reach customers, and professional services are the core elements that allow them to stand out in the competition. Providing personalized financial products and services that meet customer needs on a large platform is the core competitiveness of securities companies.