Commercial Banks Innovation Trend - Creating Open Banks

In the face of the dramatic changes brought about by fintech to the industry ecology, "commercial banks will be demutualized, will be the next industry to be subverted, and will be deconstructed by fintech companies", such arguments are flooding the media, and the market is full of pessimistic arguments about the outlook of the banking industry. Everyone is focusing on how commercial banks can change and transform in the new era.

In this context, "finance + technology + Internet" has become the strategic direction of commercial banks. Banks rely on their own advantages and knowledge of the positioning of the bank in the new industry, innovation from the strategic level, strengthen the in-depth integration of financial and technology and Internet elements, analyze customer and user needs, identify areas of innovation, build rich scenarios, explore new business forms, and corresponding changes in the organization, processes, operations, technology, etc., to establish a new business system, in order to achieve the scale of the bank's innovation.

Financial technology 3.0 era, financial and technological **** raw development

Looking back at the history of financial development, scientific and technological innovation and financial innovation have always been closely linked to the development of metal smelting technology so that the metal currency to replace the physical currency, the maturity of the papermaking and printing technology so that the gradual circulation of paper money. Since entering the information society, the role of Moore's law, the speed of information technology and the emergence of new technologies continue to accelerate the speed of financial and technological **** growth also makes the modern financial system along with information technology **** with the experience of exponential growth. From "IT + finance" to "Internet + finance" stage, and now we are experiencing to artificial intelligence, big data, cloud computing, etc. as the representative of the "new science and technology + finance" phase

Looking around the world, China's FinTech market is occupying an increasingly important position. Compared with Europe and the United States and other developed countries, China's financial foundation is much weaker, but it is China's financial market has not yet matured this feature gives China's rapid development of financial technology soil. From the distribution of global fintech investment, the financing scale of China's fintech enterprises accounted for only 3.1% of the world in 2014, but by 2018 the financing scale of China's fintech enterprises had accounted for 16.4% of the world, with a growth rate far exceeding that of Europe and the United States and other regions, significantly narrowing the gap between China and the United States of America's financial inclusion process.

On August 22 the central bank released the Financial Technology (FinTech) Development Plan (2019-2021), which is the central bank's first top-level plan for fintech, bringing many benefits to the industry.

The Plan clearly sets out the guiding ideology, basic principles, development goals, key tasks and safeguards for the next three years of FinTech work. At the same time, it gives an exact definition of fintech: "Fintech is a technology-driven financial innovation (the definition was put forward by the Financial Stability Board (FSB) in 2016, and has now become a global **** knowledge), aiming to use the results of modern science and technology to transform or innovate financial products, business models, business processes, etc., and to promote the financial development of the quality and efficiency. "

The Plan identifies six key tasks:

From the above six key tasks, centered on the development goal: "By 2021, to establish and improve China's financial science and technology development of the "four beams and eight pillars", and to further enhance the financial industry's science and technology By 2021, we will establish and improve the "four pillars and eight pillars" of China's financial science and technology development, further enhance the financial industry's science and technology application capability, realize the deep integration and coordinated development of finance and science and technology, and significantly enhance the people's satisfaction with digitalized, networked and intelligent financial products and services, so as to make China's financial science and technology development ranked at the leading international level.

We live in an era of unprecedented digital innovation. A series of breakthrough technologies have matured and are being applied at scale. This will undoubtedly change the way banks deliver financial services. Technologies such as in-memory computing and cloud computing are already having a significant impact on banks. They have also opened up new and exciting business opportunities for banks. But at the same time, these technologies have also opened the door for many companies to enter the banking space that are not traditionally banks, but come from other industries with expertise in these technologies.

Today, online retailers, communities, marketplaces, and platforms have access to large networks of customers and providers; non-banks are delivering financial services as part of their products; and technology providers (IT or fintech) are enabling the industry to innovate at an ever-increasing pace. In the face of these phenomena, retail banks recognize that new market entrants are disrupting the traditional value chain, which poses a significant challenge.

The essence of the concept of "open banking" lies in:

Direct banking in the exploration of the development of omni-channel expansion of digital natives

Banks will be direct banking, online banking, mobile banking, WeChat banking, etc., from the C end and B end levels to non-bank users and financial peers, creating an open network service banking platform and realizing the full openness of the omni-channel to internal and external customers.

Open banking creates a full-scenario financial ecosystem: finance + internet + technology

Advances in technology and changes in regulations have brought new competitors and greater regulatory pressure on banks, while at the same time transferring the initiative into the hands of customers. Open banking and APIs will continue to present opportunities and challenges for banks as they support new ways for them to interact with customers, partners and competitors. Existing banks will face changes in the competitive landscape, such as the impact of deregulation on telecoms companies and the impact of Uber's app-based business model on the car transportation and takeaway industries. Banks will no longer be competing with just other banks, but with all the organizations that provide financial services, including OEMs, retailers, fintechs, third-party providers, social networks, and more.

In order to differentiate themselves, leading banks are integrating their banking services with those of other banks and third parties to provide customer-centric, outcome-oriented products and services. "Open Banking programs and APIs are furthering this trend by helping banks to more easily interconnect with partners and customers.

For example, by connecting customers to real estate resources, sales data, real estate agents, contractors, and retailers, banks can help customers find, buy, insure, renovate, refinance, remodel, and even sell their homes. If a bank knows a person's salary, it can proactively recommend the right full-service home-buying program. The benefits to banks:

We've seen that successful banks are utilizing APIs to respond to the needs of their enterprise customers, so that banking services are more tightly integrated into their processes and systems, and become an integral part of the enterprise value chain.

For example, leading commercial banks are leveraging APIs and distributed ledger technology to enable secure, real-time data exchange for supply chain finance, cash flow analysis, and invoice matching for their corporate customers. Banks can reap the following benefits:

More partners and users, and more traffic make the Internet multiplier effect more pronounced, while enabling the platform to iterate and evolve quickly. More financial or non-financial partners accessed through the open ecological platform is conducive to the formation of an ecosystem centered on banks to create a scenario-based financial ecosystem around food, clothing, housing and transportation.

Article/ThoughtWorks Zhao Yue