How to "Go Another Kilometer" through Digital Transformation Breakthrough

This is not a new proposition. From the transformation of information recording and storage media from paper-based to electronic, to the subsequent digitization of business processes, from the use of data to analyze business characteristics in depth, assist in business management, reduce business management costs, and improve efficiency, to the innovation of organizations and business formats that has emerged with the rise of information technologies such as cloud computing, big data, artificial intelligence, the Internet of Things, and blockchain, The financial industry has achieved multiple levels of quality and efficiency improvement driven by digital transformation.

However, after experiencing a period of rapid growth, China's financial technology development also faces many challenges. The digital divide caused by the application of intelligent technology in the digital wave is becoming increasingly prominent, and the problem of imbalanced financial development between regions still exists. Some large internet platform companies are expanding disorderly into the financial field, causing competition imbalance. The "Matthew effect" of digital development between large and small financial institutions still needs to be eliminated, and the application of technology is flourishing, and key core technologies urgently need to be broken through. These imbalanced and insufficient issues are important issues that need to be addressed in the future to deepen the integration of finance and technology, and promote the digital development of the financial industry.

Currently, under the guidance of policies such as the "Plan" and the development of technologies such as cloud computing, blockchain, and 5G, the financial industry is entering a golden period of digital transformation and acceleration. More emerging technologies will be applied to traditional financial businesses, becoming a strong support for digital transformation.

However, it should also be noted that the problem of imbalanced and insufficient development of financial technology in China remains serious. Even top financial institutions face challenges in digital transformation. Wu Fushi, CEO of Soxinda Holdings, pointed out to a reporter from the Financial Times that with the end of the era of regulation, population, and internet dividends, the exogenous driving force for the development of the financial industry has shifted.

He explained, After the emergence of the demographic turning point, the financial industry has already reached the ceiling in terms of customer size. Institutions need to consider more issues such as' what kind of customers are high-quality customers' and 'how to retain these customers'. However, the demographic dividend is constantly decreasing, and with it, the traffic dividend of the Internet is disappearing. Financial institutions' previous strategy of relying on traffic and scale will face great challenges, coupled with regulatory influence and the influence of internet finance giants Impact, financial institutions must think and take action to unleash the next wave of growth curve

At the same time, it is even more urgent that the endogenous growth wind turbine in the industry has not yet been formally formed, and there is a need to accelerate changes in strategy, digitization, collaboration, and workforce. Industry experts point out that at the strategic level, some financial institutions attach varying importance to fintech, and traditional risk control requirements conflict with high risk preferences under the emergence of innovation. There is also a contradiction between short-term fast returns and long-term transformation needs. At the level of digital implementation, some financial institutions are not sufficiently equipped and prepared for the development of new technologies, with significant differences in technology application capabilities, and their risk control capabilities during transformation are not yet perfect.

Against the backdrop of highly homogeneous business and bottlenecks in core technologies, financial institutions need to achieve substantial results in digital transformation and technology application, which greatly tests their own technical capabilities and preparations in all aspects. In response, the "Plan" requires a sound system and mechanism for the application of scientific and technological achievements that prioritize both safety and efficiency, continuously strengthening the industrial ecosystem of open innovation and win-win cooperation, and bridging the "last mile" of scientific and technological achievements transformation.

Financial institutions need external open cooperation, "said Wu Fushi. But he also pointed out that whether the traditional financial system can actively integrate with the open ecosystem and cooperative institutions, adapt to complex operational processes and unique business characteristics, not only needs to consider the "face" of the institution (cooperation expectations), but also the "foundation" (business and technical capabilities).

He suggested that we should achieve the integration of various scenarios and capabilities in ecological symbiosis transformation, pay attention to the "dual wheel drive" development of open capabilities and our own capabilities, and achieve ecological co prosperity through digital connections. For example, integrating internal and external cooperation institutions, relying on information flow, capital flow, and product flow to jointly build a financial ecosystem, and leveraging the advantages of big customer groups, big data, and big scenarios. In addition, ecological partners should create and build together in terms of capabilities and models, generate strong synergistic effects, and achieve symbiosis and win-win results.

Of course, this openness actually puts forward high requirements for financial institutions. Wu Fushi candidly stated that this requires financial institutions to have the ability to open up platform capabilities, system inclusiveness, dismantle data barriers, conduct in-depth business planning, and integrate scenarios.

Small and medium-sized banks should avoid "following the trend" and "using points to explore ways to break the situation" in their transformation

Objectively speaking, in this competition for digital transformation, there is an objective digital divide between regions, groups, and institutions, especially among small and medium-sized financial institutions, where there is widespread "digital transformation anxiety". Ouyang Rihui, Vice President of the China Internet Economy Research Institute at the University of Finance and Economics, said, "Many small and medium-sized banks are very eager to engage in digitization, but they do not know how to operate it, how to turn to digitization, and what kind of digitization it will become. These issues are still unclear." He believes that in reality, most small and medium-sized banks adopt a "imitation and follow" strategy, blindly imitating the financial technology application models of large banks and joint-stock banks, It cannot effectively meet the personalized needs of customers, and the effectiveness of digital transformation is poor.

Su Zheng, Risk Officer and Deputy General Manager of the Business Unit of Zhongguancun Kejin, also told the Financial Times that compared to joint-stock banks or urban commercial banks, Agricultural Commercial Bank of China's digital transformation started relatively late. Although some agricultural and commercial banks saw the opportunity ahead of time to advance digital transformation work, the overall progress is relatively lagging. Digital transformation is not a matter of a particular business line or department, "Su Zheng explained. Although the system has been updated, its direction is not consistent with business development needs, and sometimes there are even contradictions. In this way, not only did it not reflect the advantages of digital transformation, but it also to some extent affected business development.

Regarding this, Su Zheng stated that digital transformation first needs to focus on data, follow the logic of data, and sort it out according to the process of data generation. Secondly, the digital transformation roadmap must be integrated with actual business operations. Based on his experience, in recent years, some successful digital transformation rural commercial banks have usually started from consumer credit business.

In Wu Fushi's view, there are also significant differences between small and medium-sized banks. The location of the institution, its own business characteristics, the shift in awareness in digital transformation, and the investment in DT (Data Technology) and IT (Information Technology) will all affect the effectiveness of its digital transformation. In economically active regions such as South China and East China, even small and medium-sized banks can quickly switch from traditional product oriented business models to customer-centric financial services through digital transformation. He pointed out that due to the rapid flow of funds and more intense competition in these regions, small and medium-sized banks have a strong sense of customer service. And digital customer profiling, precision marketing and other means have become sharp tools for them to continuously strengthen their customer stickiness. In contrast, in areas with relatively inactive economies, small and medium-sized banks often rely heavily on traditional channels such as offline branches in their digital transformation, expanding their revenue by opening branches and expanding their scale.

Wu Fushi stated that digital transformation is a long-term project. If small and medium-sized institutions want to seize the trend of digital transformation, they need to leverage their strengths and avoid their weaknesses, start with planning, and comprehensively develop a digital business system suitable for their own development characteristics, such as improving cross channel marketing strategies, omnichannel customer operation strategies, and a full lifecycle customer service system. Achieve breakthroughs in local business scenarios, and gradually promote digital transformation "from point to area"