Editor's note: From October 30 to 31, 2023, the Central Financial Work Conference was held in Beijing. The meeting clearly put forward the goal of accelerating the construction of a financial power, emphasizing the promotion of high-quality financial development in the mainland, and providing strong support for comprehensively promoting the construction of a strong country and the great cause of national rejuvenation with Chinese-style modernization. The Central Financial Work Conference raised the banner and planned the layout, providing a fundamental follow and action guide for promoting high-quality financial development in the new era and new journey. In order to better unify thoughts and actions to the spirit of General Secretary Xi Jinping's important speech and the decision-making and deployment of the Party Central Committee, this journal specially organizes a special topic and invites relevant professionals to discuss and exchange ideas on how to study and implement the spirit of the Central Financial Work Conference in the field of wealth management.
Author: Wang Shuai, Chinese Academy of Fiscal Sciences
Synopsis:
- In recent years, the development of inclusive finance and digital technology in mainland China have been deeply integrated, and remarkable achievements have been made in all aspects of development. At the same time, however, it is also facing new challenges, such as increasing regulatory difficulties, the digital divide, and the overlapping risks of service providers.
- The positioning and characteristics of inclusive finance itself determine that the service targets cover special groups such as rural households, low-income people, and the elderly, and at present, the digital divide still restricts the equal enjoyment of digital financial services by such groups to a certain extent.
- To promote the high-quality development of inclusive finance, infrastructure construction should be a combination of "classified policies" and "soft and hard".
In recent years, the development of inclusive finance and digital technology in mainland China have been deeply integrated, the total amount of loans has been growing, the coverage has become more extensive, and the supply of products and services has become richer and more diverse, and remarkable achievements have been made in all aspects of development. At the same time, however, it is also facing new challenges, such as increasing regulatory difficulties, the digital divide, and the overlapping risks of service providers.
Digital technology is helping the rapid development of inclusive finance
Financial Inclusion, also known as "inclusive finance", emphasizes fairness and universality, that is, providing appropriate and effective financial services to all levels and groups in need of financial services at an affordable cost. Since the Third Plenary Session of the 18th Central Committee of the Communist Party of China (CPC) officially proposed the "development of inclusive finance" in 2013, the organic combination and integrated development of inclusive finance and digital technology have achieved remarkable results, gradually forming a development pattern with rapid growth in total volume, increasingly extensive coverage, and continuous enrichment of products and services.
●The total amount of inclusive finance has grown rapidly
According to the data released by the People's Bank of China, by the end of 2023, the balance of inclusive small and micro loans was 29.4 trillion yuan, an increase of 5.61 trillion yuan over the whole of 2023, a year-on-year increase of 23.5%, and 3.7 times the 8 trillion yuan at the end of 2018; the balance of loans for production and operation of farmers was 9.24 trillion yuan, a year-on-year increase of 18%. This is 1.8 times that of 5.06 trillion yuan at the end of 2018, and the balance of loans for poverty alleviation nationwide was 1.16 trillion yuan, a year-on-year increase of 12%, with a total of 958.6 billion yuan disbursed throughout the year.
● Coverage is getting wider
Compared with traditional service methods, digital technology empowers inclusive finance to optimize the supply structure, reduce service costs, and break through the limitations of physical space.
By the end of 2022, a total of 4.952 billion personal bank settlement accounts and 4.048 billion bank cards had been opened in rural areas, and there were 740,600 service points nationwide to help farmers withdraw money, with 99.99% of village-level administrative areas covering basic payment services with bank cards as the main body. At the same time, various digital payment scenarios continue to expand, and mobile payment has sunk to county and rural areas, better meeting the diversified payment needs of rural consumers.
●More diverse products and services
In recent years, with the rapid development of digital technology, relying on the information platform, the matrix of inclusive financial products and services has been expanded and enriched, and innovative development has been achieved in terms of payment methods, product design and service applications. For example, relying on Internet technology, change the traditional offline method, develop an "online + offline" dual-channel model, and improve the efficiency of the credit approval process; For another example, some regions actively promote digital inclusive finance to empower rural revitalization, rely on big data, cloud computing and other technologies to promote smart livestock loans with live livestock as collateral, realize real-time collection and dynamic monitoring of livestock breeding data, and explore a new credit model of "biological living mortgage + insurance + Internet of Things supervision + banking".
Risks and Challenges of Digital Financial Inclusion
First, it is more difficult for the government to regulate.
Digital technology has given new vitality to the innovation and development of inclusive finance, but it has also brought new challenges to regulation. On the one hand, driven by technological innovation, the inclusive financial service model continues to innovate, the business scope is becoming more and more extensive, and the trend of cross-border mixed business is obvious, which has blurred the regulatory boundaries to a certain extent and increased the complexity and difficulty of supervision. Some financial service companies such as Ant Financial, Tencent, JD.com, 360, etc., have businesses in investment and wealth management, mortgage credit, transfer payment and other fields, and some even have all the licenses in the financial field if the actual equity holding is taken into account. The supervision of these cross-cutting and comprehensive inclusive financial products and services still needs to be further improved and strengthened. On the other hand, new technologies such as big data, cloud computing, and blockchain have changed the financial industry, and institutions have formed a service system with strong integrity and high connectivity, and the coupling and correlation of various financial products and services have been strengthened. At the same time, the virtual nature of digital inclusive financial products and services makes risks more hidden and spread more rapidly, and traditional regulatory methods are costly, making it difficult to adapt to current regulatory requirements, and regulatory efficiency still needs to be strengthened.
Second, the digital divide needs to be bridged.
The digital divide is an "incidental product" of digital technology and an inevitable phenomenon on the road to the application of digital technology. The positioning and characteristics of inclusive finance itself determine that the service targets cover special groups such as rural households, low-income people, and the elderly, and at present, the digital divide still restricts the equal enjoyment of digital financial services by such groups to a certain extent. According to the 52nd Statistical Report on China's Internet Development released by the China Internet Network Information Center, as of June 2023, the Internet penetration rate in rural areas is 60.5%, and the number of non-Internet users in rural areas is 196 million, accounting for 59% of the total number of non-Internet users in the country. At the same time, due to the outdated knowledge reserves, poor ability to accept new things, and lack of financial knowledge, the elderly group has a low recognition of digital financial products and services, and even produces a rejection mentality, and the digital divide at the cognitive level also hinders the pace of deepening inclusive finance.
Finally, multiple risks on the supply side of inclusive finance are superimposed.
The first is technical risks. While emerging digital technologies have made inclusive financial services more convenient and efficient, they have also increased the technological risks on the supply side. In order to support digital financial services, the supply side needs to build an information platform, develop a client, build a database, etc., and each link needs sufficient technical support, which link may lead to the failure of financial services or information data leakage, and the technical risk is transformed into information security risk or even legal risk, causing significant losses to financial institutions. The second is operational and management risks. In addition to the application and development of digital technology, inclusive financial products and services often need to find agents or partners, resulting in complex cooperative relationships and even multi-level principal-agent relationships, and there are business risks caused by information asymmetry and inability to achieve on-site supervision. At the same time, the organizational structure of some grassroots financial institutions is not sound enough, the management ability is not strong, and there is uncertainty about whether they can adapt to the management requirements under the digital conditions.
Relevant countermeasures and suggestions
The first is to strengthen top-level design and improve laws and regulations related to inclusive finance.
Looking at the practical experience of inclusive finance in the world, although the development level of different countries is different, the outstanding feature is that it attaches importance to the priority establishment of the legal system. Taking the United States as an example, the legal system of inclusive finance with the Community Investment Promotion Act, the Fair Credit Reporting Act and the Federal Deposit Insurance Act as the core has played an important role in promoting financial fairness and social development and progress in the United States. In view of the fact that the laws in the field of inclusive finance in mainland China are not sound enough, it is recommended to learn from the experience of the United States, accelerate the revision of existing relevant laws at the national level, study and formulate the inclusive finance law, and further clarify the strategic orientation and regulatory responsibilities of inclusive finance. At the same time, local governments are encouraged to formulate inclusive financial management measures suitable for the development of local vulnerable groups, form a three-dimensional legal system for inclusive finance, and provide institutional guarantees for promoting the healthy development of inclusive finance.
The second is to pay attention to the research and application of "regulatory technology" and strengthen the coordination and cooperation of regulatory policies.
The concept of "regulatory technology" was first proposed by the United Kingdom and is currently widely used in developed countries, aiming to optimize the regulatory model through cloud computing, big data analysis and other technologies, and improve the ability of financial supervision to prevent, identify and resolve superimposed, concealed and contagious financial risks. At the operational level, we can learn from the UK's "regulatory sandbox" thinking to explore an effective model for balancing risk prevention and financial innovation. Digital technology empowers the development of inclusive finance, mixed business operation has become the general trend, and the traditional financial supervision model is difficult to effectively play a regulatory role, so the next step should be to explore comprehensive supervision covering digital payment, digital wealth management, online financing, digital currency, etc. On the one hand, it is necessary to strengthen the cooperation between the financial authorities, clarify the regulatory responsibilities of various departments, and establish and improve the working mechanism similar to the Inclusive Finance Supervision Committee at the level of the competent authorities, so as to avoid regulatory overlap and regulatory gaps. On the other hand, we should strengthen the coordination between the financial authorities and the information security department, establish an "information + finance" dual regulatory system, and prevent and reduce information risks in the field of inclusive finance in advance by sharing regulatory data related to network security and information security.
Third, we need to consolidate infrastructure construction and narrow the digital divide.
Digital infrastructure is an important pillar of financial inclusion and the key to addressing the digital divide. To promote the high-quality development of inclusive finance, infrastructure construction should be a combination of "classified policies" and "soft and hard". On the one hand, the government should play a leading role in increasing public investment in areas with relatively weak infrastructure in the central and western regions, improving the construction of digital infrastructure, increasing Internet coverage, providing local residents with high-quality and low-cost mobile network services, and improving the availability of digital inclusive finance. At the same time, we should strengthen the innovation and development of digital financial services such as mobile payment, enhance inter-bank account cooperation, improve the convenience of capital flow and the accuracy of inclusive financial supply, and give full play to the "drip irrigation" effect. On the other hand, strengthen the construction of data platforms, on the premise of ensuring information security, encourage public departments, between the central and local governments, and between enterprises and governments to strengthen the sharing of credit reporting data, clarify unified access standards and interoperability principles, build a more efficient and transparent personal credit system, and effectively reduce the cost of information acquisition.
Fourth, strengthen the technological traction of the industry and create a good atmosphere for inclusive finance.
On the one hand, guide the suppliers of inclusive financial products and services, especially grassroots financial institutions, to strengthen the technical demonstration of digital tools, and establish a dynamic assessment and early warning mechanism to eliminate potential safety hazards to the greatest extent. Give full play to the role of industry self-regulatory organizations, carry out guidance and training in technology, management and other aspects, and improve the ability of financial institutions to resist risks. On the other hand, for special groups such as the elderly who lack financial knowledge, financial literacy should be popularized in all scenarios and in multiple ways, so that they can truly understand and accept from the bottom of their hearts that new financial products and services under digital technology can bring convenience to their daily lives, so as to enhance their sense of identity with inclusive finance. In terms of publicity channels, in addition to relying on banks and other outlets, we can also learn from the operation model of Japan's grassroots agricultural cooperatives to sink publicity and popularization to villages and communities, give full play to geographical convenience and spontaneous advantages, and improve the effect of publicity and popularization. In addition, a long-term mechanism for financial education should be established, and the financial literacy of the "long-tail group" should be continuously strengthened, so as to create a good atmosphere for the development of inclusive finance.
(Editor in charge: Hou Haoyi)
