The peak body for insurance asset management in China has outlined nine key challenges for the country’s fintech sector.
Cao Deyun (曹德云), executive vice-head and chief secretary of the Insurance Asset Management Association of China, said at the Tsinghua Wudaokou Global Finance Forum held in Beijing on 25 – 26 May that fintech brought challenges in tandem with opportunities which are best addressed via earnest research.
According to Cao fintech in China faces nine main challenges:
- Accompanying mechanisms and industry plans are deficient. “The pace of fintech growth markedly exceeds the formulation of regulatory systems, and as a consequence fintech growth lacks basic industry plans and regulatory models. This is the real situation at present.”
- Data storage and security issues. “There is a lack of management and preparatory planning for the data of financial institutions, and it’s not possible to mutually connect or link the various systems of financial institutions.” According to Cao this has led to the problems of data islands and segregation.
- Information ownership rights. “Because the provisions of Chinese law concerning the ownership of data, as well as data searches, storage, analysis, flows and commercial usage are inadequate, legislation concerning protection of personal information and ownership rights are urgently needed.”
- Lack of talent. “The talent supply and the pace of fintech growth are imbalanced, and there is a severe shortage of talent.”
- New technology has yet to mature. “Some new forms of fintech have yet to mature, and there are major impediments to the corresponding conversion of theory.
- Enterprise risk could expand. “Business for which fintech is the foundation for growth are more complex in terms of their business structure and design, and controlling business risk is difficult. Using the existing management models of financial institutions will possibly be unable to ensure the security of fintech products.”
- Market risk could rise. “The widespread application of fintech could expedite the mutual overlap and nesting of regions, markets, industries and institutions, leading to greater spill-over effects when it comes to market risk, credit risk, liquidity risk and other forms of risk.”
- The difficulty of risk identification increases. “The implanting of technology into the financial system means that it’s easier for financial technology and internet risk to compound and spread, while immense and complex information flows underpin fintech business models, which objectively raises the difficulty of risk identification.”
- Regulatory difficulty increases. “Following the growth of fintech, transaction efficiency, transaction volumes, transaction models and related financial consumption node volumes have all greatly exceeded those of traditional financial models. Information asymmetries between regulators and those regulated have further worsened, and there is the possibility of regulatory lags, regulatory arbitrage and regulatory gaps.”