With increasing uncertainty from the pandemic, Chinese financial industries are in urgent need of digital transformation. The volatility has created unprecedented opportunities for digitalisation across the world, and the financial industry continues to explore openings to embrace technology and uncover new areas of growth.
An observation on startup distribution between technology and applications has indicated that privacy computing would grow rapidly in China. Chinese authorities issued policies to vigorously promote the data factor and establish a comprehensive data protection mechanism. Therefore, privacy computing technologies federated learning have started small-scale deployment.
With the development of China’s “New Infrastructure Construction” strategy, traditional industries are all undergoing digitalisation. The industrial internet will also become more segmented, intelligent, and personalised, and financial institutions can benefit from this evolution, approach new assets, and transform these assets into data and credits.
Fintech companies have gradually penetrated all aspects of financial services by improving the capabilities of front to back offices. Meanwhile, banks are more aware of the penetration of financial technology. More and more commercial banks are positioning fintech as the “key driver” for business transformation. State-owned banks, joint-stock banks, and other small and medium banks are all applying financial technologies to digital transformation.
Chinese fintech strategies combined with current digital transformation trends will likely produce the following footprints:
- Fintech industries will be more online, open, and intelligent: Industries will convert more traditional services from offline to online and build an omnichannel strategy by tapping into emerging channels. They will apply artificial intelligence (AI) applications to online business with matching needs from both retail and corporate customers. They will create more data streams and use cases to strengthen client relations.
- New technologies and applications will be introduced to improve operational efficiency with emphasis on data factor: Industries will focus on the introduction of smart operations, smart risk management, and smart customer relationship management (CRM) with the integration of low-code SaaS applications. They deploy blockchain applications to build and expand a trusted financial service environment, piloting applications such as traceability, authentic right, trusted execution environment, and multi-stakeholder transactions.
- Integration of the industrial internet: China will focus on several core industries, deep dive into specific business scenarios, and connect financial services to the chain of transaction-account-data. China will help traditional industry clients with digital transformation to generate new service opportunities because Chinese banks normally have better technological capabilities than traditional clients.
Following the target of China’s 14th Five-Year Plan on the development of new infrastructure construction since 2020, traditional industries are undergoing digital transformation rising upon the methodology of the industrial Internet. Enterprises of all sizes must pursue development through collaboration with each other, and more attention should be given to small and medium-sized enterprises (SME) address their challenges in accessing capital.
Due to the urgent need for digital transformation, the corporate finance field nurtures innovation opportunities. Compared to the revolution of the mobile Internet which emphasises the consumer end, the revolution of the industrial internet asks for in-depth knowledge of value chains and first-hand industry knowledge from the supply side.
In 2021, financial institutions will rely on the retail banking side and develop a niche market in clothing, food, housing, and transportation as their moat. An economic moat is a business’s ability to maintain competitive advantages over its competitors to protect its long-term profits and market share from competing firms. On the corporate banking side, they will provide digital solutions for industries that have comprehensive value chains such as healthcare, automotive and education to capture new growth opportunities.
