Traditional Financial Institutions Will Transform into Software and Data-driven Companies: Ant Financial

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Ant Financial expects economic digitisation and the expanding application of fintech to have a profound impact on the way traditional financial institutions conduct business.

In an article entitled “In the Future Traditional Financial Institutions Will All Evolve into Software and Data Driven Companies” (未来传统金融机构都将演变成软件与数据驱动型公司) Ant Financial vice-president Liu Guangwei (刘伟光) highlights the expanding importance of technology for the financial sector, and its shift away from playing a mere ancillary support role.

“Technology is playing an even greater driving role,” writes Liu.

“Irrespective of whether it’s accounts management, deposit and loan remittance, clearance and settlement, risk control, trade finance, trade payments and cross-border payments, or more complex scenarios involving financial inclusion, asset management, wealth management, derivatives design and transactions, the dependence upon big data, artificial intelligence, blockchain the Internet of Things and cloud computing is increasing.”

Liu points in particular to six key transition trends for the Chinese financial sector:

  1. The financial sector is placing an emphasis upon financially inclusive services characterised by high coverage, lost costs, high efficiency and high security, as well as emphasising financially inclusive services that provide comprehensive contact. ;
  2. The end-to-end customer journey is being reshaped, changing the current financial services experience;
  3. Financial services directed at micro and small-enterprises and innovative enterprises is an extremely key area of focus for banks in future;
  4. Financial services based on site-innovations will continually evolve;
  5. Platform-based services;
  6. Cooperation with international financial institutions in terms of technology, operations and capital, and cooperation with experienced third parties.

As a result of these trends, Liu anticipates the emergence of more direct banks, online banks, privately run banks and consumer finance companies as independent legal persons, who will “surge onto the market over the next several years, expand mixed financial operations, and expand the diversity and plurality of financial services.”

Liu also highlighted the importance for banking sector financial institutions to upgrade their core systems to cloud-based platforms.

“The creation of next generation cloud-based distributed core systems with clients at their centre is the future reform trend for commercial banks,” writes Liu.

“In terms of banking sector IT transitions, the most important thing is the core banking system on which banks depend to survive and operate – the core banking system is the carrier for the external financial services of most banks, and the growth of their key primary operations.”

According to Liu the key technical challenges for the creation of distributed cloud-based financial cores and core banking systems based on the internet include:

  1. A distributed applications framework for micro-services;
  2. Distributed transaction processing;
  3. Distributed data processing.

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