Tencent President Liu Chiping recently shared his latest views with Yuri Milnr, the founder of DST Globa and the Russian “investment czar” at the Hong Kong Fintech Week.
Yuri Minar is a legendary investor in Russia, and many Internet companies, such as Facebook, Twitter, Alibaba, Xiaomi, Toutiao, and Meituan, all have Yuri behind their early investments. In 2010, Tencent became a shareholder of DST and established a long-term strategic partnership with it. In this Hong Kong Fintech Week dialogue, Yuri played the role of an interviewer, and “asked” Liu Chiping about the opportunities and challenges of the future of Fintech Currency, financial technology and other issues under the epidemic.
Liu Chiping pointed out that China’s financial technology is now unique in the world, largely based on its late-mover advantage in the financial sector-because Chinese consumers have not developed credit card spending habits, it provides more convenient mobile payment popularization. condition. In addition, Chinese users’ embrace of mobile Internet and regulatory openness to innovation are also important factors contributing to this result.
The three core functions of financial technology are to enhance user participation, promote interconnection in the ecosystem, and more in-depth data analysis. Liu Chiping believes that in the next 10 years, all financial institutions will become fintech companies, and Tencent wants to play the role of a collaborator among them, cooperating with institutions, supervision, and users for a win-win situation. Speaking of digital currency, Liu Chiping pointed out that today’s digital currency is essentially not encrypted and scarce, and the potential of blockchain technology is far from being fully exploited. The following is the full text of the dialogue translated by Smart Investor
Late start, user dependence and regulatory opening
Put China’s financial technology innovation in a leading position
Yuri: Today I will have a dialogue with Martin Liu (hereinafter referred to as Liu Chiping). I believe everyone is familiar with him. For those who do not know him yet, let me briefly introduce him: Liu Chiping joined Tencent in 2005 and assumed office in 2006 Tencent President, under his leadership, Tencent has become one of the most important technology companies in China and the world. Today, we will discuss the role of fintech in China and the global economy. Chiping, welcome to Hong Kong Fintech Week.
Liu Chiping: Thank you, Yuri, and also to Invest HK, the organizer of this event. It is a pleasure to meet you online.
Yuri: The development of China’s financial and technology industries was not very successful. What do you think is the reason why China has made breakthroughs in these areas in the past few years?
Liu Chiping: Yes, China’s financial technology sector is currently performing very well, the industry is very active, mobile payments are ubiquitous, and there are strong data-driven consumer credit services. I think there are three reasons for this. First of all, China actually started very late in the financial sector, and there has been no credit card payment method for a long time. Credit cards were introduced in the 1950s. Over the past 70 years, they have established a strong ecosystem in the West, and consumer habits have also been developed. Therefore, credit cards are still the mainstream payment method in Western society. However, Chinese consumers have not generally developed the habit of using credit cards. Therefore, when mobile payment came, it quickly became a popular payment method. Second, Chinese consumers are more dependent on the mobile Internet. They spend more time on the mobile Internet. They will also use mobile Internet applications to do all kinds of things. Third, I think China’s regulation is important for innovation. The behavior is more open. As long as you are a trusted operator, when your innovative ideas do not violate financial regulations while benefiting the society, the regulators will strongly encourage your innovation. The above three points put China in an advantageous position in the field of financial technology innovation.
Yuri: What is the fundamental difference between Chinese financial technology and financial technology in other parts of the world?
Liu Chiping: Compared with other parts of the world, China’s payment structure is very special. Most countries’ payment behavior is dominated by credit cards, but in China, we are basically dominated by mobile payments. Therefore, our related new services are based on mobile payment. This makes our fintech ecosystem more innovative than other parts of the world. Starting from mobile payment, we continue to develop new and innovative financial services.
Stronger user participation, ecological interconnection and better data utilization
Is the main component of financial technology
Yuri: What do you think will be the development trend of financial technology in China and the world in the next 5 to 10 years?
Liu Chiping: If you look at it from a long-term perspective, such as the next 10 years, I think all financial institutions will evolve into financial technology companies. In other words, in the future, the difference between financial technology companies and financial institutions will gradually disappear, so there will be a great divergence in 10 years. In the next 10 years, we may see some new players who did not exist in the past enter the market. At the same time, I also think that many financial institutions will embrace financial technology and transform into financial technology companies. Of course, to look forward to such a future, we first need to know what financial technology is.
I think that fintech has the following important components-the first point is of course technology-driven-using technology to bring users a better sense of participation. The second point is that you need more advanced technology to interconnect different parts of the entire ecosystem, thereby reducing friction costs. The third point is to make better use of data to gain insights into your customer base and better risk management. I think the above three points are the basic principles for the application of financial technology in the financial system, and it will also become the core competitiveness of financial enterprises in the next 10 years.
Yuri: What does fintech mean for the overall economy? What you just mentioned about reducing friction costs, effectively using data, etc., for the global economy?
Liu Chiping: I think the overall impact of financial technology is definitely positive. Consumers will get better services and a higher sense of participation; friction costs will also be reduced, which will make the entire system more efficient; risks can also be more effective management. Of course, blind innovation may incur more risks, so I think that supervision has two important responsibilities in this field: while encouraging constructive innovation behavior, it also manages the risks that may arise in the field of financial technology.
Yuri: What role do you think fintech will play in the major developing markets in the next 10 years? Liu Chiping: The situation in some developing countries will be very similar to China. If they have not established a credit card-led payment method, or if many people do not have a credit card or even a bank account, then when financial technology comes, I think the population in these areas will be more Easy to accept financial technology services. I think many application scenarios of financial technology in China can be easily replicated in other developing countries.
Yuri: Do you think technological innovations like 5G and the Internet of Things will play an important role in financial technology innovation?
Liu Chiping: So far, financial services have low demand for bandwidth and computing performance. I think these technologies can empower financial services in the future. For example, in scenarios such as contactless payment and face recognition, these technologies will be useful. But in fact, many related technologies are already widely available in the market. The main question now is whether you have a large enough ecosystem to use these technologies in the payment flow.
The current digital currency is essentially without encryption and scarcity
The potential of blockchain is far from being fully exploited
Yuri: Let’s talk about cryptocurrency. In the next 10 years, what role do you think cryptocurrency will play in the global economy?
Liu Chiping: We have not yet entered the cryptocurrency field, but I can provide you with some amateur opinions. In my eyes, cryptocurrency provides us with three value propositions: 1. It is an “electronic gold”, which essentially provides a value storage mechanism; 2. It is bound to the blockchain, At the same time, above the functional layer, you can also bind the software layer and information to it; 3. It is essentially anonymous, so it is very popular outside the law. Looking to the future, the demand for value storage will always exist, but I don’t think we need a lot of “electronic gold” at present, so only a very small number of cryptocurrencies can play the role of value storage. I think the blockchain is the most interesting and important part of this field, but it has a fundamental problem in the scarcity of supply-because if the supply is not limited, it can be applied to many different scenarios. Therefore, I think that although the current digital currency takes advantage of the blockchain, it is essentially not encrypted and scarce, and these two points will help the future application of digital currency. When it comes to anonymity, there are all kinds of birds when the forest is big (and when the market is big, there are all kinds of transactions). Certainly some people value this very seriously, but with the strengthening of supervision, anonymity will gradually be squeezed.
Yuri: In addition to the cryptocurrency field, what other scenarios do you think blockchain technology might be applied to?
Liu Chiping: The power of blockchain is far from being fully exploited. I think blockchain technology will play an important role in the construction of financial technology ecology in the future.
Tencent plays different roles in China’s financial ecology
But our core principle is to be a collaborator, not a disruptor
Yuri: What role do you think Tencent will play in China’s financial ecology in the future?
Liu Chiping: We play many different roles in China’s financial ecology. We provide the leading mobile payment platform, WeChat Pay, with over 900 million monthly active users, and more than 1 billion transactions are completed through WeChat Pay every day. It is committed to providing users with a convenient payment experience while reducing merchants (especially small merchants) The cost of collection. Looking at the world, you will find that small merchants often have to pay 2%~3% handling fee to collect money, but in China, this ratio is less than 0.1%, so WeChat Pay is a very money-saving collection for small merchants. means. We also have WeBank, which I call a banking cooperation platform with a banking license. In other words, users’ loan behavior will be allocated to our partner banks (currently 60), and they can help us Of users fund loans and then distribute interest. At the same time, we control the risk of default for these cooperative banks. This is a very successful model.
We also have our own wealth management platform-Licaitong. The current asset management scale exceeds 1 trillion yuan, making it one of the best wealth management platforms in China. We have also begun to build our own insurance brokerage business. We will cooperate with many insurance companies to design more insurance products. Finally, our cloud services provide financial institutions with the underlying technical foundation and solutions to help them achieve digital upgrades. As you can see, in many of our fintech businesses, we position ourselves as a partner and technology implementer, empowering the industry, not a disruptor in the industry. Under the guidance of this principle and positioning, we work closely with regulators and attach great importance to risk management, which is the top priority of financial services and financial markets. At the same time, we also cooperate with the best existing financial institutions for a win-win situation. We are committed to creating the highest quality financial services for users, rather than blindly expanding.
Yuri: Tencent is also an experienced investor in the industry. How do you define your financial technology investment strategy in China and the world? Liu Chiping: In China, we have built our financial technology business very organically. The financial technology companies we invest in are companies that are closely connected with our financial technology business, such as WeBank. Recently we established Fusion Bank in Hong Kong, a brand new digital bank. As for the rest of the world, we see financial technology as a trend with many good opportunities, but at the same time we also value the localization of the market. Therefore, we invest in some local financial technology companies or regional leading companies all over the world. . We believe that regional financial technology leaders will continue to grow, and we also believe that we can bring technology and experience to these companies to help them develop their businesses faster.
The epidemic has accelerated changes in consumer spending habits
Conducive to the long-term development of financial technology
Yuri: What do you think the impact of the epidemic has on the financial technology sector in China and the world? What difficulties and opportunities does the epidemic bring to the development of financial technology? Liu Chiping: The situation in China is different from other parts of the world. The transaction volume of mobile payment declined briefly during the lockdown period. Because many mobile payment scenarios were actually completed offline, offline activities were restricted and offline payments were naturally restricted. Also affected. But when the lockdown ended, the amount of mobile payment rebounded very quickly, and now the growth has returned to normal levels. But in other parts of the world, the epidemic is still raging, and we believe that fintech may benefit from increased online shopping behavior due to the lockdown.
In the long run, I think the habits of online consumption and digital payment that people have developed during the epidemic will also help the development of this industry. So in general, in the short term, the epidemic may bring some challenges to financial technology to some extent, but the probability is that it will be good in the future. I believe that financial technology will continue to grow strongly.
Yuri: Are you suggesting that this kind of influence on changes in consumption habits will be very significant?
Liu Chiping: Yes, we can see from the example of China that although our lockdown period is relatively short, consumers have developed the habit of online consumption and online payment. Even if the epidemic is over, they are more inclined to adopt this method. Go shopping. So the epidemic is equivalent to accelerating consumers’ acceptance of this online consumption model, and this habit will continue to be maintained.
The biggest challenge in the future of fintech is how to manage innovation
New players need to be in awe of the capital market so as not to disrupt the financial order
Yuri: In the continued widespread application of financial technology, what challenges do you think it may face?
Liu Chiping: First of all, I think there are huge opportunities in the application of financial technology. The entire financial industry will benefit from the various technologies we talked about above. Some new players may appear, and many existing financial institutions will also benefit from digitalization and technological upgrading. They can help these institutions better interact with customers, while managing risks and reducing costs. What are the challenges in these various benefits? The most important risk is still how the industry manages the risks brought about by innovation-when an innovative technology comes, do you accept it or reject it? When you choose to accept, how do you control the financial risks that follow? Because new innovations may bring some new players who don’t care about risks. I think that for different players in the market, supervision needs to develop a set of supervision schemes so that new players will not just expand the scale for the sake of profit and give up the pursuit of quality. At the same time, supervision also needs to consider how to introduce innovation to maintain reasonable growth in the future. This is why I said why we should work more closely with regulators to provide advice and suggestions for the setting of rules-while allowing innovation, let innovation be brought under proper supervision.
For existing financial institutions, I think they really need to embrace the future at this stage. They have a strong ecosystem, extremely high industry knowledge, and superb skills in financial transactions. But in the future, they need to invest more in areas such as establishing deeper connections with customers and better data analysis.
Yuri: Finally, I would like to ask where are the future opportunities for Tencent?
Liu Chiping: When discussing Tencent’s role in the financial ecosystem, we have already talked a bit. We will continue to make efforts in the fields of mobile payment, consumer credit, asset management, insurance and cloud services, but the core principle is that we must become partners. We want to cooperate with financial institutions as a technology solution provider, through cooperation with institutions to win-win, develop together, and seize new opportunities. At the same time, we hope to use our experience to help regional leaders in other parts of the world, so that they can build their own financial technology services.
