This is an article written by Dr. Xiao Feng, chairman and general manager of Wanxiang Blockchain, more than a year ago. It was first published on December 26, 2016 in "Financial Magazine", edited by Wang Dong. Dr. Xiao expressed his views on the development trend of fintech in the article, and it is still instructive to read now, so the most complete article is republished here.
After experiencing the agricultural society and the industrial society, the human society is rapidly evolving into an information society because of the rise of the Internet, especially the mobile Internet. According to the description of the famous Internet observer Kevin Kelly in the book "Out of Control", the evolutionary laws of this information society follow biological logic, showing the characteristics of distribution, decentralization and self-organization. "Out of Control" was published in the early 1990s. Most of the predictions in the book about the evolution of the information society, such as cloud computing, big data, mobile Internet, sharing economy, artificial intelligence, etc., have been realized one by one in the past 20 years. Or made a breakthrough! Kevin Kelly's prediction has not expired, and in recent years he has been making further additions and revisions to the prediction he started in "Out of Control".
In his speech at this year's Wuzhen World Internet Conference, Ma Yun said: In the previous industrial era, we turned non-standard into standard, and now we need to turn all standards into non-standard and personalized. What he is talking about now is actually the coming information society, and standardization or not is a significant difference between the information society and the industrial society.
The characteristics of distribution, decentralization, and self-organization discussed by Kevin Kelly, I think, will become the basic technical architecture of the information society. If this social infrastructure is being reconstructed, how can all the industry structures and business structures attached to this infrastructure remain unchanged?
We can't completely predict what the financial service industry in the future information society will look like, but we can say with certainty that the future financial industry will be completely different from what we have seen and are familiar with! The financial service industry we have seen so far is based on the basic technical framework of industrial society: processization, cybernetics, standardization, hierarchy, and a high degree of reliance on physical space to provide services... The basic structure of industrial society determines The basic structure of the industrial society financial industry. What reason do we have to think that all this is natural, innate, and will cease to be the same?
The evolution of mankind to the information society began in the late last century. Although academia has not given an exact date for the beginning of our information society, it should be about 40 years old today. In fact, the structure, technology and business model of today's financial industry have been quietly changing. Alipay and WeChat Pay have completely built the communication structure of the financial industry on the Internet (IP communication), while the traditional financial industry is still running on the telecommunications network (CT communication). The outdated communication structure that has remained unchanged for decades has greatly hindered the competitiveness of the traditional financial industry and Internet financial enterprises! New finance cannot grow on an old communication structure.
For example, the old man who sells roasted sweet potatoes on the street can only use Alipay and WeChat payment to receive non-cash payments; for example, digital wallets on mobile phones can provide financial services to the world’s 2.5 billion poor people. Due to cost reasons, traditional financial institutions cannot provide them with services; for example, under the existing financial system, the cost of small cross-border remittances in the world is as high as 12%, and the annual fee for small cross-border remittances for the world's poor will only be At a cost of US$20 billion (the figure comes from the World Bank), only a cross-border remittance system based on blockchain technology can reduce the cost of small cross-border remittances to almost zero! What a great poverty alleviation project this is!
Fintech 1.0: Scenario Revolution
Some people say that Internet finance is the Chinese name for FinTech, and some people say that Internet finance and FinTech are not the same species. In my opinion, Internet finance is actually the initial stage of FinTech, or it may be more accurate to call Internet finance FinTech 1.0.
I remember that three years ago, some people questioned the popular Internet finance, thinking that it does not exist at all, and that Internet finance is just a "new word" created by good people. One of the reasons is that you can't search for any relevant English information with "internet finance", which means that there is no legend of Internet finance in English rivers and lakes!
What exactly is internet finance? A passage from Dr. Wang Jian, the former chief technology officer of Alibaba Group and the founder of Alibaba Cloud, gave me a lot of inspiration: "The Internet in Chinese should be Internent plus WWW in English. Internent here is Refers to the physical connection, the WWW here is the World Wide Web, often referred to as the Web (web page), which refers to the online content. However, the Web occupies more than 90% of the connection content of the traditional Internet, so the two are often confused. "Connection only means that you are connected to a computer, "Online must be realized on the Internet" ("Online" published by CITIC Press, written by Wang Jian, p. 38). I also wrote in the book "Investment Revolution: Asset Management in the Era of Mobile Internet", also published by CITIC Publishing House: "Online" and "Online", the two different relationship states from the Internet, have significant meaning and value. The difference between clouds and mud!
Wang Jian said: "Internet technology has turned offline into online, and the changes brought by the latter to human society may exceed that of human beings using fire for the first time." The core of Internet finance is not "internent finance", but "web" finance". Everything is so valuable because it's online!
The arrival of the Internet finance era depends on the birth of mobile communication technology, the popularization of smart phones, and the change in the mode of people's relationship with the Internet from surfing the Internet to being online. Because online, so mutual gold!
The essence of online is a "digital migration" of human society. The first great migration occurred in prehistory, when human ancestors migrated from tropical Africa to more suitable temperate zones; the second great migration occurred in modern times, when humans migrated from Africa and Asia to Europe and the United States; the third great migration occurred in modern times, when humans Migrating from poor villages to rich cities; now, with the development from industrial society to information society, human beings are migrating from physical space to digital space: e-commerce helps us reconstruct digital business relationships; social networks help us re- Building digital relationships...
We can also regard this digital migration as the second great geographical discovery of human society. In the first great geographical discovery, Columbus and Magellan accidentally discovered the New World of America in order to re-find the trade route to Asia, which greatly expanded the physical space of human society and brought endless wealth to the European continent; The second great geographical discovery of 2009 will expand the digital space of human society. We know that the law of digital development follows Moore's Law, the speed of development follows exponential growth, and the development efficiency follows zero marginal cost. We may not have the ability to imagine that in the digital space, the wealth added value of human society will be ten times or dozens of times that of the physical space?
With the help of virtual reality technology (VR), it may help us to imagine how the digital space will multiply the wealth: a stadium can only bring 100,000 people to the scene of a football game; a VR glasses can Hundreds of millions of people can enjoy the same experience as the scene in their living room, and everyone wearing VR glasses can be the best viewing position on the scene. If you have a special hobby, you can also choose the angle of the referee, the angle of the coach, the angle of the goalkeeper, the angle of the center, the angle of the defender... Of course, you have to pay a higher price for this. Selling the best viewing position on the stadium to hundreds of millions of people, for the organizers of sports competitions and the two participating teams, their wealth may be more than ten times magnified by the magic mirror of digitalization!
What makes all this change is online! The first feature of Internet finance is online!
The second feature of Internet finance is the scene!
We can see this clearly from the different financial paths of BAT: the first and currently the only Alibaba that can turn Internet finance into an independent business. The main reason is that Ali's e-commerce scene is naturally the closest to financial needs. After buying and selling goods online, the second level of demand is naturally payment, and the demand after payment is naturally borrowing. To achieve a loan, it naturally requires credit investigation.
However, as a social network Tencent, its second-tier demand is not necessarily payment or other financial service needs. We built a group in WeChat, not to find someone to borrow money. There is not a huge "Penguin Financial Services" belonging to Tencent on social networks, and Tencent's Internet finance sector has therefore been unable to concentrate its efforts. Until now, Tenpay, WeChat Pay, and WeBank have still expressed their own independent expressions. . It was not until the emergence of WeChat red envelopes that Tencent found its focus on Internet finance. WeChat red envelopes are the Chinese characteristics of social networks, and they are indeed the second-level needs under social networks. Therefore, once WeChat red envelopes were born, they were full of vitality, so that the data in the first half of this year showed that the number of payments made by WeChat Pay has exceeded Alipay. Of course, in terms of payment amount, it is estimated that WeChat Pay cannot exceed Alipay. WeChat red envelopes win in the frequency of payment rather than the amount of payment.
Baidu of BAT is even more lackluster in the field of Internet finance. It's not that Baidu doesn't work hard, but that the second-tier demand of search is difficult to point to the demand for financial services. From search to demand for financial services, there may be three or four levels in the middle, and the funnel reaches the fourth level, and the conversion rate of financial demanders may be better than nothing. Of course, it is not that Baidu will never have the opportunity to develop its own financial business. The arrival of the AI era will give Baidu a good opportunity to develop its financial business. IBM should be one of the earliest companies in the world to study artificial intelligence, but Google is currently the most powerful company in artificial intelligence! This is because artificial intelligence relies on massive amounts of data and huge computing power. Artificial intelligence results can only be obtained by training machines with huge computing power and massive amounts of data. The main reason why Google is leading the world in artificial intelligence is because it is the largest data company in the world, while IBM only has an advantage in technology and has no advantage in data. But don't forget that, like Google, Baidu is a search engine company.
Internet finance is scene finance! People who claim to be doing Internet finance without an Internet scene actually only use the Internet as a tool, and what they do is financial Internet! Internet companies relying on unique Internet scenarios to get involved in financial services do have their own secrets, which once made traditional financial service institutions feel huge pressure.
I have observed that traditional financial institutions generally have three coping strategies when faced with this pressure: one is to build the Internet of Finance, and regard the Internet as a tool to improve the original financial services; the other is to create their own In the Internet scene, financial services are implanted in the self-created scene in order to transform to Internet finance. For example, Ping An Good Car, Ping An Haofang, and Ping An Good Doctor launched by Ping An Insurance Group; Rong e Bank, Rong e Link, Rong e Purchase and so on launched by ICBC. The courageous and cutting-edge experiments of these traditional financial institutions are indeed worth looking forward to, but the challenges are huge! The third is to open the city gates, dismantle the walls, immerse in various Internet scenarios, use different data of each scenario to design personalized financial service products for this special scenario, turn financial services into scenarios, become One of the services that can be obtained anytime, anywhere in the scene. This is the case with ZhongAn Insurance. They have cooperated with more than 200 Internet scenarios and designed insurance products with unique characteristics for these more than 200 different scenarios. Launch accident insurance that can be purchased at any time on sports social networks; launch freight insurance on e-commerce platforms; even launch flight delay insurance that can be purchased at the boarding gate on travel platforms... My personal humble opinion: this may be the case It is the correct posture for the Internet financialization of traditional financial institutions!
With the development of virtual reality technology (VR, AR), the relationship between human beings and the Internet has changed from "online" to "online", and will further develop to "presence". People use VR glasses, and everything far in the sky is like right in front of you. You can sit in your own living room, log in to the bank's VIP service hall, and lie on the sofa in your own living room to enjoy immersive banking services. By then, perhaps this financial scene revolution due to the "online" of the mobile Internet will come to an end in the "presence" of virtual reality!
Fintech 2.0: The technological revolution
With AlphaGo as the symbol, the "artificial intelligence" originated from a meeting at Dartmouth College in 1956, and finally ushered in its first glorious moment on its 60th birthday! When the Chinese version of "The Singularity is Near" became popular a few years ago, we could hardly imagine how artificial intelligence will surpass human intelligence in 2045. The robot Go battle in 2016 has made this prospect more and more clear. I once saw a chart depicting the development of Moore's Law in the Computer History Museum in Silicon Valley. Since Moore's Law was invented in the 1960s, it has experienced a slow accumulation of technology for more than 40 years. It was not until around 2000 that Moore's Law began to enter. Exponential growth stage, and from then on! The AlphaGo incident indicates that artificial intelligence technology will enter its exponential growth era since 2016, and large-scale applications are just around the corner.
The increasing maturity of artificial intelligence technology has brought FinTech into its 2.0 stage: the stage of technological revolution.
When people talk about FinTech from a technical point of view, they tend to mention mobile internet, cloud computing, big data and artificial intelligence. In fact, this is conflating three different levels of things that arise from each other. Because of the mobile Internet, people have changed from surfing the Internet to being online, which is why the era of big data has arrived. With powerful cloud computing capabilities and massive amounts of big data, it is possible for people to train machines and achieve artificial intelligence. Cloud computing and big data are only the intermediate technologies of FinTech, and artificial intelligence is the final application of FinTech.
In addition to artificial intelligence technology, another core technology of FinTech is blockchain (distributed ledger). The technical points of blockchain can be briefly summarized into three items: first, distributed ledger; second, encryption algorithm; third, programmability. As we all know, the invention of the double-entry bookkeeping method is an important factor in the origin of the modern financial industry from Italy (another factor I think is that due to its geographical location, Italy first started transnational trade with Asia, and complex transnational trade requires complex Financial services), distributed general ledger technology is the biggest improvement in the accounting method of human society since the invention of double-entry accounting. It allows all parties involved in financial transactions to keep accounts on one ledger, so information flow and capital flow are combined into two. First, payment and settlement have become real-time, full, and full-time. Since the distributed ledger is designed to have a non-designated third-party bookkeeping, the data cannot be faked or tampered with; the two core algorithms of the blockchain, one is the consensus algorithm, is used to solve the problem of bookkeeping on the distributed ledger , one is an encryption algorithm, which is used to protect the privacy of accounts; the programmability of the blockchain makes it possible to program financial transactions no matter how complex, so as to use computer programs to automatically execute various transactions and conduct transactions automatically subsequent clearing.
The maturity of these three technical points of blockchain and the subsequent large-scale application of blockchain technology in the financial field will lead the Internet to enter the second stage: the evolution from the Internet of Information to the Internet of Value. The so-called Internet of Value means that we can expect to achieve financial transactions and complete payment and settlement on the Internet in the same way as convenient, fast, zero-cost, all-weather, peer-to-peer distribution, storage, and processing of information in the near future.
Fintech 3.0: A paradigm revolution
When we start talking about FinTech version 3.0, we are actually discussing the future shape of finance.
The advent of the information society, the completion of digital migration, the realization of virtual space, and the bitization of economic structure will change the essential attributes of finance to a certain extent. In the industrial society, what we see more is the time value dimension of finance; while in the information society, finance will be endowed with a new value dimension: the spatial value dimension. The significance of FinTech is not mainly to optimize the traditional finance that we are familiar with, but to do it from one to ten. It will create a new land from zero to one, and innovate and grow new finance that we have not yet been able to fully imagine.
Based on the mobile Internet, human beings have achieved "online"; based on virtual reality technology, human beings will achieve "presence". From online to presence, it expands the spatial scope of human society, which is not only infinite in the sense of physical space, but also connects the physical world and the digital world. With the help of IP communication technology, one of the characteristics of new finance in the information society: online and presence have become the spatial attributes of finance.
The infrastructure of the information society is distributed systems, and the best book to understand the distributed architecture of the information society is Kevin Kelly's "Out of Control". The core content of the distributed social architecture is the peer-to-peer network: the pyramid structure of the industrial society has become a mesh structure in the information society era, and in this structure, all nodes are equal and directly connected. The centralized control that can be seen everywhere in industrial society is weakened, and the intermediary is gone. The popular sharing economy business model is a good example of a distributed structure. The second characteristic of new finance in the information society: point-to-point, end-to-end, P2P disintermediation services.
With the deepening of the revolution in the financial industry, not only the physical space of traditional financial institutions will be broken, but tools like VR glasses can completely virtualize the physical business premises of banks, so that anyone, anytime, anywhere, can Enjoy banking services through VR glasses. Moreover, with the help of blockchain technology, the bank's information system and account system can and should be fully opened to customers, and even share ledgers with customers, sharing a set of systems, various encryption algorithms and encryption chips can be compared to now. Bank Secrecy approach does a better job. Banks should not only no longer have counters, but also no longer have venues. All financial services have been integrated into the scene. At present, the popular QR code mobile payment has actually printed the payment and payment outlets on any commodity. The third characteristic of new finance in the information society is financial services that can be needed anytime, anywhere.
The huge economic difference between the bit structure of the information society and the atomic structure of the industrial society is that the bit structure follows the law of zero marginal cost. If a song is recorded on a CD, the distribution volume and cost are positively related; for a paper letter, the delivery volume and cost are also positively related. And if it is issued through the network, the marginal cost is almost zero. The financial industry in the industrial society is already very developed, but according to the World Bank report, there are still 2.5 billion poor people in the world who cannot enjoy the services of the existing financial system, because the existing financial system cannot bear the cost of serving them. For the first time, blockchain technology makes it possible to use a distributed network outside the current financial account system to provide the financial services they need at a very low cost through digital wallets in mobile phones at very low cost. . The fourth characteristic of new finance in the information society is inclusive finance and finance for everyone.
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