Economic Observation Network reporter Hu Qun "Continuing to deepen scientific and technological leadership and scientific and technological empowerment is an inevitable trend. Under the tide of continuous development of science and technology, commercial banks will closely follow the development trend of leading science and technology, closely integrate finance and technology, continuously promote technology to empower finance, and constantly innovate the means and methods of financial services." On March 9, Ping An Bank (000001.SZ) released its 2021 financial report showing that it will continue to deepen technology to lead digital operations in 2022.
In 2021, Ping An Bank's IT capital expenditure and expense investment was 7.383 billion yuan, an increase of 2.4% year-on-year. Ping An Bank continues to increase investment in science and technology, which has been reflected in the fields of refined management and production efficiency.
"Scientific and technological capabilities have been fully applied to business, risk, operation, management and other aspects, digital operation efforts are constantly promoting capacity improvement, cost reduction, risk controllability, in 2021 cost-to-income ratio of 28.30%, down 0.81 percentage points year-on-year, which is not easy for a retail-based bank." Xie Yonglin, chairman of Ping An Bank, said in his annual report speech.
Fully digital operations
When Ping An Bank comprehensively deepens its digital operations, the digital transformation of small and medium-sized banks still needs to be strengthened. Zhu Wulin, assistant to the president of Hang Seng Electronics, said that the "real economy" has once again become a hot topic during the two sessions, "steady growth" has set the general tone of this year's economic policy, and "strengthening the effective support of finance for the real economy" is the main task and goal of the financial industry. At the same time, with the development of the digital economy, the deep integration of finance and technology is accelerating, and financial technology is becoming an important engine to help the development of the real economy.
Ping An Bank regards "technology leadership" as the driving force of strategic transformation, and provides support for the digital operation of retail business, corporate business and capital interbank business by creating "five leading technology capabilities" of technical capabilities, data capabilities, agile capabilities, talent capabilities and innovation capabilities, and empowers them in the fields of risk control and operation support. In the field of "hard technology", Ping An Bank promotes the deep integration of new technologies such as the Internet of Things, AI, big data, and satellite communication systems with banking business; creates lambda laboratories to prospectively explore the potential application of cutting-edge technologies in financial scenarios, successfully develops satellite communication terminals in collaboration with partners, and jointly promotes the launch of "Ping An No. 1" satellites and "Ceres • Ping An Bank Digital Pocket" rockets, continuously empowering new supply chains, reducing corporate financing costs, and continuously exploring quantum computing and quantum communication in financial modeling Applications in the fields of privacy and security promote the transformation to "digital banking, ecological banking, and platform banking".
"We believe that the gap between leading financial institutions and late-entry financial institutions is at least more than 5 years, and some even 10 years apart, and this trend is still expanding." Wu Fushi, CEO of 03680.HK, said in an interview with the Economic Observer Network that state-owned large banks have laid out and practiced earlier in the field of digitalization, and joint-stock banks have followed up, and under the continuous and high proportion of investment for many years, they have activated the agility and collaboration capabilities required for innovation and transformation in the organization, and cultivated digital talents and culture to improve the efficiency of transformation.
According to the "Research Report on the Development of Fintech of Small and Medium-sized Banks (2021)" jointly released by the Alliance of Small and Medium-sized Banks, OneConnect and the FinTech 50 Forum, with the further promotion of the depth and breadth of fintech applications, small and medium-sized banks have made remarkable achievements in using fintech to promote digital transformation. However, compared with many large banks, the depth and breadth of open cooperation between small and medium-sized banks are not enough, and they face risks in business models, data security, and technical vulnerabilities. The development difference between urban commercial banks, rural commercial banks and private banks is quite large, and rural commercial banks are facing greater pressure under the general trend of financial technology development due to the constraints of generally small scale and weak innovation ability.
"Data and talent are the core resources of the Bank, technology and agility are the basic guarantee and implementation means, and innovation is the driving engine to provide a steady stream of new kinetic energy." According to Ping An Bank's annual report, at the end of 2021, Ping An Bank's technology personnel (including outsourcing) exceeded 9,000.
"One of the challenges banks face in their digital transformation is the lack of technical capabilities and technology talent." On March 2, the China Banking Association and PricewaterhouseCoopers Jointly released the "China Banker Survey Report (2021)", showing that large state-owned banks and joint-stock banks invested in financial technology higher than local commercial banks, foreign banks, development financial institutions and policy banks, while rural commercial banks invested in financial technology at a higher rate.
The "Questionnaire Survey on the Cultivation and Development of China's Fintech Talents (2021)" released by Beijing Liyan Institute of Finance and Development shows that there is a gap in fintech professionals in mainland financial institutions, and city commercial banks lag behind other types of commercial banks in the construction of fintech talent mechanism and the average salary of fintech talents, especially small and medium-sized city commercial banks do not have core advantages in the competition of fintech talent markets.
Strengthen financial technology supervision
"With the further development of digitalization, large banks also have the pressure to survive, the country's physical outlets have declined for three consecutive years, and the future pattern of banks and the entire business model will undergo profound changes." On March 2, Guo Shuqing, chairman of the Banking and Insurance Regulatory Commission, said at a press conference held by the Information Office of the State Council.
The digital transformation of banks is one of the concrete manifestations of China's digital economy. Since the 2017 government work report was first proposed, the "digital economy" has been directly written into the "Government Work Report" for 5 times. Liu Chen of the Bank of China Research Institute believes that the "Government Work Report" not only proposes to "strengthen the overall layout of digital China construction", but also uses a larger page to concentrate on the development of the digital economy, which is quite different from the relatively scattered relevant expressions in previous reports. In 2020, the scale of the mainland's digital economy will reach 39.2 trillion yuan, accounting for 38.6% of GDP. During the "14th Five-Year Plan" period, the scale of the mainland's digital economy will continue to expand, and it is expected to maintain an average annual growth rate of about 9%, and it is expected to exceed 60 trillion yuan in 2025.
Xiao Gang, member of the National Committee of the Chinese People's Political Consultative Conference and former chairman of the China Securities Regulatory Commission, believes that financial technology has profoundly changed the way and format of traditional financial services, greatly improving service efficiency, quality and ability, and promoting economic and social development, while also deriving complex and diverse ethical issues and potential risks, bringing a series of new challenges to financial innovation, financial supervision and financial security. The ethical failure of financial technology is mainly manifested in two aspects. The first is the issue of data ethics. Some institutions and scientific and technological personnel have sacrificed data privacy, resulting in the theft or sale of customer information, lack of fiduciary obligations to protect sensitive information such as bank cards and accounts bound by customers, resulting in related bad transactions, restricted transactions, bundled sales and other behaviors, resulting in unfair agreements. The second is the issue of algorithmic ethics. Algorithms transform people's various footprints and activities into various scores and predictions for people, and conduct loan evaluations and insurance evaluations, and the code of rules will bring about problems such as opacity, inaccuracy, unfairness, and difficulty in review.
Information security governance has become an important aspect of national security and competitiveness in the era of digital economy, and banks, as a data-intensive industry, face more challenges in the field of information security. In recent years, regulators have issued a number of policies to regulate the development of financial technology. In terms of data ethics, on November 1, 2021, the Personal Information Protection Law came into effect, forming a citizens' personal information protection network together with the Civil Code, the Cybersecurity Law, the Data Security Law, the E-commerce Law, and the Consumer Rights and Interests Protection Law. In terms of algorithm ethics, on March 26, 2021, the central bank issued the "Specification for the Evaluation of Financial Applications of Artificial Intelligence Algorithms", which established an evaluation framework for artificial intelligence financial application algorithms in view of potential risk problems such as algorithm black boxes, algorithm homogenization, and model defects in the application of artificial intelligence technologies, and systematically put forward basic requirements from the aspects of safety, interpretability, accuracy and performance.
In terms of data governance, Xiao Gang suggested that we should deeply apply the financial data security grading guidelines and the financial application evaluation specifications of artificial intelligence algorithms, and establish and improve the enterprise data management system of financial institutions, technology companies and third-party data service providers. In terms of technology applications, further effectively manage the data sources and quality used for machine learning, set up bias control mechanisms, and prevent discriminatory services targeting specific consumer groups. Keep records of data management processes and modeling methods to ensure traceability and auditability.
"Bankers support strict regulation of fintech, with a focus on the supervision of network information security protection and data quality management." According to the "China Bankers Survey Report (2021)", 45.6% of bankers believe that they should continue to promote the work of "establishing and improving the financial technology regulatory infrastructure" and establish a forward-looking, comprehensive, fair and authoritative financial technology infrastructure; and should strengthen supervision at the standard and institutional level of financial technology, and improve the standardization and institutionalization of regulatory requirements.
As a means of coordinating financial innovation and risk prevention and control, the "regulatory sandbox" has been widely recognized and applied in recent years, and the mainland is also actively promoting the application of the regulatory sandbox. More than 30% of bankers believe that they should "continue to explore and improve the Chinese-style regulatory sandbox" and use innovative regulatory measures to enhance the capacity and level of fintech supervision.
"In recent years, with the application of artificial intelligence technology and machine learning algorithm models in the financial banking industry, the problems of algorithm black box, security issues, and bias problems have also been exposed, and have become potential risks affecting the healthy development of the financial industry." Wu Fushi said that in response to data ethics and algorithm ethics, the industry is also exploring the application of some new technologies. For example, privacy computing is a collection of technologies that implement data analysis and computation under the premise of protecting the data itself from being leaked to the outside world. Among them, the technology derived from the integration of artificial intelligence and privacy protection technology represented by federated learning is one of the mainstream privacy computing technology directions. Federated learning is a technology that can take into account financial data mining and privacy protection, and it has become an effective way to solve financial data barriers and privacy protection.
Data security will be a necessity
"China's banking industry has accumulated a huge amount of data in its business development, and banks have taken data as their important asset and core competitiveness." The "China Banker Survey Report (2021)" shows that in the current data governance field, there are problems such as unclear ownership of data products and transaction order, which restricts the operational efficiency and transformation and development of the banking industry, and data governance needs to be strengthened urgently.
"At present, whether it is driven by strict supervision or driven by digitalization, the importance of data governance for financial institutions is self-evident. For the banking industry, the current construction of data governance focuses on data security, metadata, data architecture, data services and other fields. Banking institutions need to form a data strategy vision based on governance and value as the core, fully realize the value of data, and improve management and operation capabilities. Wu Fushi said.
"Data security will be a necessity for the future business world." Jiang Tao, founder and chairman of Tongdun Technology, said that in the process of promoting the development of the digital economy, taking into account the value of data elements and data security protection is a problem related to the future. Data elements have new characteristics that distinguish them from traditional production factors, such as low marginal cost, large scale effect, high liquidity and strong reusability. Privacy computing can build a unified, secure, efficient, and compliant multi-source data application ecosystem across multiple institutions, thereby providing richer and high-quality data services and creating more value for social development.
"Privacy computing cannot solve all the problems of data governance, it will solve the problem of data governance from the dimensions of data security and circulation security, so as to help the use of data assets move from disorder to order." Tong Ling, founder and chairman of Lanxiang Zhilian, told the Economic Observation Network that with the development of the digital economy, privacy computing will not be limited to the financial industry, operator industry, but will be applied to more industries, such as the Ministry of Industry and Information Technology issued on March 7 "Vehicle Network Security and Data Security Standard System Construction Guide" on the emphasis on "data security", simply put, as long as there is a demand for data circulation in the industry, there must be a demand for privacy computing technology.
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