Technological development will not lead to the extinction of finance because it can't replace human-to-human communication in financial services, according to Levin Zhu, former chief executive of China International Capital Corporation.
“If you want to manage people’s wealth, you have to talk to them about their needs...You can [of course] send an email to everyone in the world in one second but many things cannot be easily solved through an email. It requires a lot of communication and dialogue,” the son of former Chinese premier Zhu Rongji said on Tuesday at the Boao Forum in Hainan.
The veteran investment banker Zhu was talking during a panel discussion about internet banking, where he also questioned the use of “big-data”, which Chinese fintech companies are rushing to develop in an effort to aid credit decisions and enhance risk management capabilities.
“Can big data really tell you this person’s credit records without human beings’ judgement?” he asked. “You [might] know he’s able to buy this but you don’t know where his money comes from. Is it from his father, his own, or his friend?”
“The key is whether you can verify the data after you gain it. The process is very time-consuming,” Zhu added. “To avoid one single error, you need humans to monitor [things]. Then you can never enter an era without humans.”
Unlike Zhu, other panelists came from the fast-growing peer-to-peer (P2P) lending industry and voiced more confidence in big-data and technological innovations.
Zhang Jun, former engineer at Microsoft and CEO of PPDai, one of China’s largest P2P lending platforms, said his firm mainly relied on big-data in terms of individual creditworthiness and default probability.
“We don’t need to meet our clients at all for judging their creditworthiness and [calculating] default probability. Alibaba and Tencent are also using big-data to do this,” Zhang said, while admitting the process cannot be "100% automatic" without the need for humans.
Meanwhile, heads of the country’s leading P2P firms also called for more consistent regulation across the industry in the wake of the Ponzi scheme at Chinese P2P lender Ezubao, which took more than Rmb50 billion ($7.7 billion) through fake investment projects from 900,000 investors, the official Xinhua News agency reported in January.
“Now when people talk about P2P [companies], they [tend to] think negatively of them. In order to change this view, we have to regulate ourselves and we need [proper] regulation,” said Yang Fan, CEO of Beijing-based P2P lender Iqianjin.
He said the industry called for the regulator to draw a bottom line. “The P2P industry is like a kid. When he grows up, he is bound to trip and fall…You have to tell him [that] he cannot go somewhere dangerous or climb too high [rather than forbidding him from doing anything].”
In December 2015, Chinese regulators, including the China Banking Regulatory Commission, released draft rules that aimed to tighten regulation of P2P lending. Under the new rules, P2P lenders are banned from carrying out 12 kinds of businesses, ranging from selling bank wealth management products, taking in public deposits and providing any kind of guarantee to lenders.
They can serve only as intermediaries between borrowers and lenders, and have to leave the latter’s money in the custody of qualified banking institutions.
Separately, in a group interview earlier in the day, Zhang of Renrendai said the firm had recently teamed up with Minsheng Bank, China’s largest private lender by assets, to be in the first batch of P2P lenders to provide custodian services to protect customer funds.
The Beijing-based firm has set up individual banking accounts for each of its clients that allows the tracking of capital inflow and outflow, which requires Renrendai to keep Minsheng Bank updated on a daily basis.
“Such a system can let the government and the bank see clearly the fund flows of all clients. There are no grey areas,” he said.
When asked about the biggest hurdle during the co-operation with Minsheng, Zhang said it was the lack of clear template and regulatory framework.
“Banks tend to be conservative on this [business]…We didn’t know what to do and how to meet the regulatory requirements.”
