Zhuang Chenchao Talks About "De Regulation" Of Internet Finance

I have been working in the Internet industry for almost all my career and I am always at the forefront. I believe that innovation and opportunity are all in the history, and quote Greenspan's words in his book: "go to history to find experience, apply experience to the future, and this is the opportunity for innovation".

Why does Travel Company spend so much time doing Internet Finance? In fact, turning over history, you will see that all innovations are in history: when Citibank (Citibank) was bankrupt, it was bought by Travelers Group. Travelers Group is actually a very important shareholder of Citibank. It is a Travel Company. It is a travel insurance business. Citibank is one of the largest banks in the world, and its very large business is related to tourism. The second company is American Express, also the world's largest business travel company. Its first product is Travelers Cheque, so this is the relationship between travel and finance.

　　 The real cause of financial innovation: go Supervision

Since the beginning of 2013, Internet banking has been very popular in China. Why did it suddenly happen at this time? Is the Internet technology and mobile technology reaching a certain height, or the penetration rate of mobile phones and Pad has reached a certain height? So the Internet financial balance Bao and Alipay suddenly burst out?

Turning over history, the climax of financial innovation in all the countries of the world comes from the word "Deregulation". The real reason is that last year China's financial sector began to really "deregulate". Around 1970, the United States once experienced a huge deregulation, that is, the US savings and loan crisis, similar to China's village banks to supervise, so that they can expand in a wide range of interest rate competition, this time the United States financial innovation is very active.

Why is it that P2P is not a public fund now? Because the SFC has not yet gone to the regulatory level. So far, if you want to raise funds, the SFC will talk to you, because this part has not been regulated yet, and the liberalization of interest rates and the marketization of interest rates are the product of regulation. For P2P, the current regulation is relatively relaxed, which is the real origin of Internet finance.

How to look at the policy risk problem of P2P development under China's national conditions? This can also be found in history. All countries in the world, including Europe and the United States, have strict legal penalties for socialized financial losses.

The latest regulation of P2P in the US is "Qualified investor (qualified investors)". The concept is the same as hedge funds, that is, if investors have their own behavioral capabilities, sufficient assets and investment experience, and follow certain investment principles, they can invest in high-risk products, such as hedge funds and P2P. Regulation guarantees two things: first, the fewer the crowd, the higher the assets; and second, if there is a massive loss, it will not be a large number of people going to the streets, because "going to the streets" has turned the incident from economic problems into political issues.

This kind of risk control is actually a phenomenon all over the world, which has nothing to do with China's national conditions. There are many things that are not national conditions. The problems encountered by any political body or any company in the world are constantly repeating in history. They will adopt the same principles to solve problems, but the names are different and the scenes are different. Therefore, the problem of high risk products will be encountered and solved many years ago by hedge funds in the US.

　　 P2P The core of the problem: solving risk control problems

How do we solve many problems of P2P in China today? Some companies do more radical and ignore the regulation. They are always playing the edge of the law. But a better idea is how to solve these problems in some countries that have already had similar problems. For example, there are some P2P companies that are conservative in their practices, such as requiring investors to monitor their investment behavior, not to invest too much alone, and to diversify investment. I think these are some good ideas for the healthy development of the whole industry. Personally, I am very optimistic about P2P. Although there are still many risks and challenges in China, the solution to the problem can be found in other countries and in history.

What is the biggest risk that P2P will encounter? A crisis occurred in the US in the process of de regulation of savings and loans in 70s, resulting in a financial disaster. This is the reason why the FDIC (Federal Deposit Insurance) Corporation was founded later to solve the deposit insurance problem.

Before the financial crisis, you saved money in the United States and used any bank account to guarantee 100 thousand dollars of national credit. If the bank went bankrupt, the state would compensate you for 100 thousand dollars. After the financial crisis, this amount increased to 250 thousand. This problem was caused by the supervision at that time.

Why do regulatory changes lead to such a big change? The essence of banks is to take deposits, hedge risks and lend money. In the process of deregulation, all banks relax the terms of borrowing in order to expand their business. For example, the original buyers only need to pay ten points, and now they pay twelve points, so that they can absorb funds in order to scale up quickly. If there are five hundred companies running on the market, who will pay higher interest rates and bolder loans, the final result will be disaster. This phenomenon is familiar with hearing, like the market of P2P. The open competition of the United States is a disaster. Many banks fail, and many of the money they store is lost. Finally, the state intervenes. But in the process, many companies are bigger because of risk control.

P2P this business is ultimately effective, with emphasis on risk control. This leads to the essence of Internet finance. The Internet is a tool. It can not change any fundamental problems or provide fundamental solutions, but Internet technology leads to the expansion of scale, the increase of permeability and the enhancement of effectiveness. Even the data that could not be obtained in the past can now be obtained. The fundamental problem of finance is actually risk control, so we have to ask ourselves two questions:

1, "do I design this financial product really changed the risk control?"

2, "how do we change the risk control?"

The first possibility is to apply the law of large numbers under the same risk to make the risk more dispersed. The second possibility is in the transaction data, which is more popular in the world than the "special lending engine", that is, according to the interpretation of the data, design the corresponding lending products, such as Jingdong, Ali's supply chain finance, they grasp the data that traditional banks can not grasp at the same time, and their risk monitoring capability is also something traditional financial institutions can not do. Including in the tourism industry, we are also doing some supply chain finance, such as a very large volume of airline tickets, which are potentially many special loan products.

This concept can also be applied to crowd raising and insurance. Tourism companies like places and Ctrip have insurance licences. We are pushing a lot of special insurance for tourism. According to the "data", we interpret the data of insurance consumers completely differently and understand the situation completely differently, so we can give different calculation of the risk value, so our insurance pricing is also different, and even the selling way will change. This is the judgement that data changes the risk bargaining, and decides the different pricing.

CapitalOne is a very famous company in the pre Internet era. It is a special high risk customer group. It is the first to quote the concept of big data. It has carried out many analyses on the value at risk and made many innovations in marketing methods. They served an American company, which used to be unable to borrow money in traditional computing mode, but CapitalOne borrowed money from the company through some special means to calculate risks and interest, resulting in the rapid development of the company. Today, CapitalOne is the fourth largest bank in the United States, but it has only 15 years of history. The big banks in the United States have hundreds of years of history.

　　 Innovation opportunities: returning to the essence of business

Whole innovate Where is the opportunity to go back to history, and then do not pay attention to the nothingness of Internet thinking. I think the essence of business is very simple and simple.

What is the nature of retail? Products should be whole, low cost, fast delivery, no matter what technology is eventually returned to this area. The nature of Internet finance is the same. People who lend money always want high interest, high yield, low risk and convenience. The borrower is the bottom interest, the loan speed is fast, and the repayment condition is flexible. The key question is what new technologies, new scenarios, and extreme environmental optimizations are used in today's scenario, rather than focusing on those very vague concepts. The first principle is to implement the simplest thinking in Internet finance so as to find opportunities.

I personally think that Internet banking is not a business to eat. This can be explored from the perspective of history. Finance is a very virtual product. The bigger the business is, the more complex it will become. The "agent cost" in economics is that the following people will take advantage of the Commission mechanism to take some mature transitional risks in exchange for the proceeds of transition, which is bound to happen.

In order to guard against such things, large financial institutions must have many layers of supervision. But the more regulation, the lower the operational efficiency, and this kind of industry has disappeared from the market. There are many businesses in the financial industry. First, there are small businesses that are bought by big companies, and some problems may arise after they get bigger. When the government gets involved, it will bring more supervision, and these businesses will be assigned to small companies. For example, the transaction of resource products is too risky. Therefore, many governments supervise the transactions of large banks, and turn the resources off the table and create a new round of innovation opportunities. Therefore, I think Internet finance will not be a winner taking all trades. As long as we are a big leader in any subdivision, there will be many opportunities for us to go on the market. So I think this industry is full of opportunities and changes.

WAL-MART has almost monopolized the industry in the retail sector, but nowhere in the world can it be said that a bank is monopolized, which is determined by the nature of finance. The key is to understand the nature of the industry, ignore the impetuous rumors, and truly understand the technology, apply technology to the scene, solve some of the very original problems and improve, in order to achieve real innovation.