We are in a rapidly growing and constantly evolving era. The Matthew effect is becoming more pronounced in the financial sector as the industry adjusts and regulations are strengthened. Leveraging the vast amounts of big data, user numbers and consumption scenarios they have accumulated, China’s internet giants have begun moving into the Fintech sector, which has intensified competition and segmented the market into more verticals. Fintech platforms operating in this market environment should take full advantage of the resources at their disposal to innovate differentiated products, target specific market segments, reduce costs and manage risk in order to compete effectively and carve out a space for themselves.
Fintech platforms need to create their own path for development by identifying optimal asset allocation and exploring opportunities within their vertical. This will help them stand out.
Fintech is an emerging industry that complements traditional financial institutions, helps China deepen its financial reform, and promotes innovation in support of China’s economic development. Predicting what will happen in this rapidly-changing environment requires both courage and ideas that can withstand scrutiny. The only thing that remains constant is that things will always change, therefore, we should always seize new opportunities, technologies and ideas. 2017 was a turning point for the P2P lending sector. After going through a period of short-term growing pains caused by negative incidents such as founders absconding with deposits and businesses going under, the industry is now entering a new phase driven by the implementation of new regulations and compliance standards. The days of wild growth are being replaced with regulated and rational development.
The history of human economic development is driven by technology and system innovations that reduce production costs and transaction fees, and improve operational efficiency. Demand for liquid cash is generated by the flow of goods in a market economy and meeting this demand is the primary function of finance and financial tools. China is in the midst of the “Internet +” era. I believe that “Internet +” is not a simply a combination of Internet and various traditional industries, but a combination of modern information and communication technologies with Internet tools that facilitate the deep integration of the Internet and traditional industries to create new economic development opportunities.
The intermediary nature of P2P lending platforms cannot be changed, regardless of what form Fintech companies take. At present, the essential role in the market that Fintech occupies has not changed, because traditional financial institutions and the nature of finance have not changed. As the Internet has developed, new tools have emerged and changed the way most businesses conduct themselves. These new tools include third-party payments, social networking, and search engines. Developing in tandem with this trend, big data accumulated and analyzed through innovative algorithms and cloud computing allows companies to learn more about user’s behavior, greatly improve the efficiency of finance, and reduced business costs.
In recent years, China’s Fintech companies have created new financing channels for SMEs and micro enterprises, as well as provided a new asset allocation platform for users. These companies are capable of providing professional, effective, flexible and targeted services for consumption and financing. Financial services in the “Internet +” era will create new market demand through innovation and transformation.
Engaging in the Fintech business require more than just a firm belief. The cruel reality is that this sector is experiencing a deep restructuring. Following incidents such as founders absconding with deposits, difficulty in withdrawing funds, platform deficiencies and bankruptcies, a large number of investors have suffered losses that negatively impacted the entire P2P lending sector. This has resulted in higher customer acquisition costs, increased difficulties in marketing and a tougher environment for platform operators. Fintech has become an industry with both great prospects and great uncertainties. External factors may help with the success of many start-up companies like Hexindai, but huge challenges can emerge in an instant and create fatal problems.
I believe Fintech companies in the “Internet+” era who leverage big data and cloud computing to transform their financial services will significantly change people’s lives in a similar way that power plants and water companies did many years ago.