Fintech Advancement Development of fintech offers new solutions to companies to solve the challenges caused by the ongoing epidemic
As the fight against the novel coronavirus enters a critical period in China, ensuring the resilience of small and micro enterprises has become a crucial task for the authorities. Fortunately, impacted companies can now count on a new ally to get through this challenging time - fintech, namely new technologies applied to the financial sector.
In recent years, Chinese fintech 3.0, represented by technologies such as artificial intelligence, Big Data, cloud computing and blockchain, has transformed the development of Chinese society. In the near future, fintech is expected to play a significant role in ensuring stable funding for companies caught in the current extraordinary situation. Indeed, on January 31, the Beijing Local Financial Supervision and Administration issued a notice to strengthen financial support measures with fintech while promoting prevention and control of the epidemic.
Finance plus technologies
In fact, mitigating the financing difficulties of small and micro businesses is one of the main roles of fintech.
The new notice urges local financial institutions to offer more financial support to businesses by appropriately lowering interest rates and fees. These measures are intended for small and micro enterprises in the fields of production, distribution and transport of epidemic-prevention equipment, as well as enterprises in the fields of wholesale and retail, housing, catering, logistics and transport, and tourism and culture affected by the epidemic. According to the notice, there is a need to increase the use of technical tools to improve the security, convenience and availability of financial services through smart finance, mobile finance and online services.
It should be noted that fintech is already in wide use in China, where it is seen in particular in electronic payment, telehealth, smart rural finance, electronic social security cards, and services on campuses. In
recent years, a number of financial functions such as paying fees and requesting information about contingency funds have been offered by banking and payment applications such as Alipay.
Among the many applications of fintech, that of offline payment is by far the most frequently used. In January, according to the People’s Bank of China, the country’s central bank, more than 60 institutions including China Unionpay, commercial banks and payment institutions were using facial recognition to conduct offline payments in a secure way. Consumers can therefore carry out purchase transactions without the need for either a mobile phone or a bank card, which is an important step in improving the financial transaction experience.
During 2020, new financial technologies are expected to to be applied to a broader range of activities. According to some experts, new technological models could significantly improve the payment efficiency. In the future, fintech will be used in cross-border payments, small and micro business payments and other areas to deepen application possibilities and integrate resources to help businesses enhance their operational efficiency.
As a matter of fact, many banks are already using facial recognition to improve transaction security, especially when opening class-ii bank accounts, transferring large amounts of money and withdrawing cash.
Strengthening supervision
“The essence of fintech lies in finance, hence supervision needs to be strengthened,” Yin Yong, Vice Mayor of Beijing, said at the 3rd China Internet Finance Forum 2019, held on December 17, 2019 in Beijing.
Speaking of supervision, Yin said that the use of flexible management methods should be explored, for example, through making information and products publicly available to create an inclusive and prudent supervisory tool based on legal compliance and protection of consumer rights.
This tool is the so-called “regulatory sandbox” which was recently launched in its Chinese version. On December 5, 2019, the Chinese central bank took the initiative to implement a fintech innovation supervision pilot project in Beijing. It was followed, starting from the end of 2019, by the approval of pilot projects related to the application and supervision of fintech in 10 provinces and cities in the country, namely Beijing, Shanghai, Jiangsu, Zhejiang, Fujian, Shandong, Guangdong, Chongqing, Sichuan and Shaanxi. The development of Chinese fintech has therefore entered an era of supervision.
According to Li Wei, Director of the Science and Technology Department at the People’s Bank of China, it is important for this “regulatory sandbox” to comply with China’s national conditions. An important feature of the “regulatory sandbox” is that it helps control risks in certain important areas. Among other things, the pilot projects include a risk compensation mechanism.
On January 14, the first six pilot applications were released to the public. This first batch consists mainly of products to be used in the field of finance, including the Internet of Things, artificial intelligence, Big Data and other relevant technologies. The aim is to alleviate financing difficulties of small and micro businesses, to improve the convenience of financial services and to broaden financial service channels.
“The objective of the sandbox pilot project is to offer certain policy exemptions to innovation projects in a strict regulatory environment, to alleviate concerns about innovation in the field of fintech. At the same time, through advanced institutional arrangements, the legitimate rights and interests of consumers of financial services can be protected to achieve a dynamic balance between financial innovation, legal compliance and consumer protection,” said Xue Hongyan, Assistant to the Dean of the Suning Financial Institute, an affiliate of the leading Chinese commercial enterprise, Suning Holdings Group.
While introducing the Beijing pilot project, Huo Xuewen, head of the Beijing Municipal
Bureau of Financial Work, said that in the past, many innovations exceeded regulatory limits or constraints, which resulted in increased risks. In other words, the “regulatory sandbox” provides a secure space for fintech innovation.
Che Ning, Deputy Secretary General of the Beijing Internet Law Association, said it was particularly important to fine-tune the “regulatory sandbox,” stressing that this process should be coordinated with the promotion of the law. In the future, there is a need to promote self-discipline within the organizations concerned and improve existing legislation at both the central and local levels. This will turn the “sandbox” into a real supervision tool, he said. CA
Sandbox tests are expected to have a clear objective (e.g., reducing costs to consumers) and to be conducted on a small scale. Businesses will test their innovation for limited duration with a limited number of customers.