The impact of Internet finance on traditional commercial banks?

1. Internet finance changes the way of value creation and value realization of commercial banks

Over the past ten years, China's commercial banks have achieved sustained, rapid and stable development, with a compound annual growth rate of nearly 20% in total assets and total liabilities. However, so far, the development mode and profitability of commercial banks are basically the same as the traditional "heavy inputs rather than benefits, quantity rather than quality, scale rather than structure, and speed rather than management" external crude growth mode, and the connotation of "one-high, two-low, and three-excellent" is still a long way from being realized. Intensive operation has a long way to go. Currently, spread is still the main source of income for Chinese commercial banks, and in 2011, the proportion of non-interest income in China's banking industry only accounted for 19.3%, despite the increase. From the perspective of traditional value creation and value realization of commercial banks, since their customers are mainly large enterprises with stable demand for loans and high-end retail customers, security, stability, low cost and low risk are the basic demands of customers, and the value creation and value realization of banks are mainly to provide customers with safe, stable, low cost and low risk financial products and services by means of their professional technology, complex knowledge and complicated processes. products and services.

Under the Internet financial model, the types of target customers have changed, customers' consumption habits and consumption patterns are different, and their value demands have undergone a fundamental transformation, which has completely overturned the traditional way of value creation and value realization of commercial banks. Market participants have become more popular and widespread, and small and medium-sized enterprises, entrepreneurs and the general public can participate in all kinds of financial transactions through the Internet. Financial product or service providers are those emerging financial institutions that focus on providing customers with fast and low-cost services, and their social division of labor and specialization are greatly diluted. Customers are mainly small and medium-sized enterprise customers and young consumers who pursue diversified, differentiated and personalized services, and convenience, speed, participation and experience are the basic demands of customers.

The competitive basis of Internet financial institutions is network technology, information technology and data processing technology, and business processes such as demand response, maturity matching, risk pricing and management are greatly simplified. Under the Internet financial model, the products and services provided by financial institutions to customers are modular asset portfolios on data analysis, and the advantages of the kind of financial products based on intensive knowledge and complex technology provided by traditional commercial banks to customers in the past have been weakened. According to the theory of disruptive innovation, Internet finance has led to an evolution of the basis of competition for traditional commercial banks, shifting from security, stability, low cost and low risk to speed, convenience and experience, which in turn has begun to disrupt the core business of banks from the bottom of the pyramid.

2. Internet finance leads to the marginalization of the payment function of commercial banks

The payment mode under the Internet finance model is based on mobile payment, which transfers the value of money through mobile communication devices and wireless communication technology to settle the debt relationship. Internet finance further accelerates financial disintermediation, marginalizes the payment intermediary function of commercial banks, and substitutes their intermediary business. For example, Alipay, Paypal, Ebay and Express have been able to provide customers with settlement and payment services such as collection and payment, automatic account splitting, and transfer and remittance, air and train ticket purchasing, and electricity and insurance payment, creating a clear substitution effect on commercial banks.

To date, the central bank has issued payment business licenses for five batches of 197 third-party payment companies, including Internet giants such as Alibaba, Tencent, Shanda, Baidu and Ebay. At present, the business scope of the third-party payment has covered cell phone and fixed telephone payments, bank card payments, currency exchange, prepaid card issuance and acceptance, Internet payments, digital TV payments, etc., the services provided by the simple payment, settlement penetration to the entire industry chain to provide industry solutions, the regional scope of the breakthrough in Beijing and Shanghai and the coastal expansion of Henan, Shanxi, Sichuan, Chongqing, Inner Mongolia, Heilongjiang, and so on. The company's services have been expanded from pure payment and settlement to providing industry solutions for the entire industry chain.

With the development of the Internet and e-commerce, China's Internet third-party payment platform transactions, the issuance and circulation of virtual currencies, involving more and more users, the third-party payment has become a huge industry. According to the data of Yiwang Intelligence Center, the annual transaction scale of China's third-party Internet payment market in 2011 amounted to RMB 2.16 trillion, an increase of 99% compared with 2010. Although it is a far cry from the nearly 2,000 trillion yuan of business processed by the national payment system in that year, third-party payment organizations have reached into the core business of banks and have established a dominant position in the field of electronic payments. Industry insiders expect its transaction volume to explode in the next few years, and its business share will continue to rise.

3. Internet finance reconstruction of the existing financing pattern

In the Internet financial model, the Internet financial search platform for the supply and demand of funds for both sides to provide an opportunity to discover the market, while modern information technology greatly reduces the information asymmetry and transaction costs, the two sides of the other side of the information to basically achieve a complete understanding of the funds intermediary will no longer be needed, and instead of the funds information Intermediary.

For example, Zopa, the world's first lender for all established in March 2005, acts as an information intermediary in the process of lending and borrowing money: on Zopa's webpage, lenders can list the amount of the loan, the interest rate, and the time when they want to lend the loan items; the borrowers are free to look for a loan product suitable for them without an intermediary, while the borrowers can look for a loan product suitable for them without an intermediary. The borrowing rate agreed upon by the borrower and lender is mainly determined by the risk preference of the lender, with risk-averse lenders pursuing higher interest rates and risk-adverse lenders settling on lower rates to avoid the associated risks. Similarly, the domestic Rong360 is committed to providing customers with professional financing and loan search services, realizing the direct interface between users and business people, so that users can obtain more cost-effective financing and loan products through search.

It should be emphasized that Internet finance has unique advantages in serving small and medium-sized enterprises (SMEs) financing and personal consumption loans, including simple loan approval process, fast disbursement speed, and rich and diverse product types. For example, focusing on small and medium-sized enterprise financing services, Ali credit, its Taobao merchant loan process includes: 3 minutes to apply, no manual approval, 1 second to the payment to the account. In recent years, the Internet financial development momentum is exceptionally rapid, which Ali Financial since its inception in 2010, has accumulated more than 130,000 small and medium-sized enterprises to provide financing services, loans totaling 28 billion, in the first half of 2012 on the cumulative issuance of loans of $ 13 billion, the new 40,000 loaned enterprises, the non-performing loan rate of only 0.72%.

Also reportedly, even some experts predicted that "if Alibaba gets a banking license, surpassing Minsheng Bank in three years is not a problem!" . Therefore, the Internet financial model can not only achieve the same resource allocation efficiency as direct and indirect financing, but also significantly reduce transaction costs. Xie Ping, deputy general manager of China Investment Corporation, pointed out that 20 years later, "Internet direct financing market" or "Internet financial model" may form a third financial mechanism that is different from both indirect financing of commercial banks and direct financing of capital market. operation mechanism.

4. Internet finance challenges the traditional financial intermediation theory of commercial banks

Mishkin (1995) pointed out that there are two main reasons for the existence of financial intermediaries: firstly, financial intermediaries have economies of scale and specialized technology, which can reduce the transaction costs of capital financing; secondly, financial intermediaries have specialized information processing capabilities, which can alleviate information asymmetry and resulting adverse impacts between the savers and financiers. information asymmetry and the resulting problems of adverse selection and moral hazard. Therefore, capital intermediation and information intermediation are the two most basic functions of commercial banks as financial intermediaries, and risk sharing, liquidity and information have become the most important services of banks. The emergence and rise of Internet finance commercial banks traditional financial intermediary theory of the existence of the basis of a strong challenge, can be analyzed from three aspects:

First of all, Internet finance to reduce market transaction costs. Banks direct financing and indirect financing in the stock and bond markets, despite the important role of resource allocation and economic growth, but also generates a large market transaction costs, including the cost of loan information collection, the cost of contracting between the bank and the customer, the cost of evaluating the customer's credit rating, the cost of post-loan risk management, and the cost of dealing with bad debts. This can be reflected in the high profits of banks and brokerage firms, such as according to the 2012 third-quarter report, 2,471 listed companies in January-September realized net profit of 1.49 trillion yuan, of which 16 listed banks will be as high as 812.767 billion yuan, accounting for 54.5 percent.

In the Internet financial model, the supply and demand side of the operation of funds rely entirely on the Internet and mobile communication networks for contact and communication, and can realize multi-party to multi-party transactions at the same time, the evaluation of the customer's credit rating and risk management is also mainly through the data analysis to complete the transaction between the two sides in the information collection costs, the borrower and lender credit rating evaluation costs, the cost of bilateral contracting, and risk management costs, such as minimal credit. The cost of information collection, credit rating evaluation, bilateral contracting cost and post-loan risk management cost is extremely small.

Secondly, Internet finance reduces information asymmetry. Information asymmetry is one of the important foundations for the existence of commercial banks. Under the Internet finance model, there is full communication of information between the two parties to the transaction, transparency of the transaction, complete marketization of pricing, and complete dataization of risk management and trust rating. For example, a Shanghai customer needs to apply for a consumer loan of 100,000 RMB for a loan term of 12 months. When financing through Rong360's professional loan search platform, he can choose among 27 loan products offered by 10 commercial banks as well as 9 non-banking financial institutions, and each of them has unique product features.

Then again, when the Zopa platform undertakes the function of intermediary for money lending, it firstly rates the borrower's risk with reference to that borrower's credit score with Equifax credit rating agency; secondly, it enters the borrower's family situation, the purpose of the loan, the amount of money borrowed, the maximum borrowing interest rate that the borrower is willing to pay and the credit rating, and arranges for the borrower to be placed into the appropriate level of the market segments; Finally, lenders with specific credit ratings refer to the borrower's credit rating and, in conjunction with the term of the loan, participate in a bidding process with their own lending rates, with the lower rate winning.

Third, Internet finance accelerates financial disintermediation. The emergence and rise of a large number of third-party payment organizations in Internet finance has greatly accelerated financial disintermediation. In the traditional payment industry chain, e-commerce, third-party payment companies and banks play their respective roles: e-commerce to provide users with an online trading platform; third-party payment to establish a gateway service platform to realize the consumers, merchants, financial institutions, and online payment, and to provide the cash flow, fund clearing services; the bank is the final funds settlement service provider.

But as the third-party payment organizations grow, they are no longer satisfied with just being the gateway payment platform for banks, but have begun to expand directly into the areas of supply chain financing and credit financing for small and micro-enterprises by taking advantage of their data and information accumulation and mining. Although the current Internet finance credit business derived from third-party payment accounted for a relatively small, but because it provides a direct link between the lending and borrowing of funds between the two sides of the channel, become an important direction of the strategic and business transformation of commercial banks.