Two sides of the same coin, hot topic at Lujiazui Forum: innovation and regulation
Financial innovation will generate a large number of new financial products and services, which may cross the existing legal boundaries, thus bringing about the so-called governance issues. How to promote innovation on the one hand and reduce problems on the other? At the 2024 Lujiazui Forum held on June 20, the guests shared their views through the theme forum of "Digital Financial Innovation and Governance".
According to research by the China Academy of Information and Communications Technology, in 2022, the scale of China's digital economy will be 50.2 trillion yuan, ranking second in the world in terms of total volume, accounting for 41.5% of GDP. There is an urgent need to develop digital financial formats that match it.
Le Shajie, vice president and chief operating officer of Amundi Asset Management Group, believes that the development of technologies related to digital finance mainly has the following four trends: first, software as a service can expand in scale and at a faster pace; second, open source, which is seen as a necessary factor for innovation and globalization; third, artificial intelligence, which has been talked about for many years. The development of artificial intelligence is completely new and is moving at a very fast pace; fourth, consulting and analytical capabilities, which require the establishment of digital tools for consultants at insurance companies and banks.
Zhang Weizhong, Chairman of Shanghai Pudong Development Bank, made a detailed analysis of the relationship between financial innovation and regulation. He pointed out that digital finance is to use digital technology to provide financial services and products, rewriting financial service products and even subverting the model of financial services. Innovation is a driving force, which will continue to promote innovation under the support framework of digital finance in order to connect with customers and expand business. It is a problem that the supply side must solve. Supervision is the power of control, which allows your innovation to run on the right track to ensure that the cost of innovation is lower, especially to ensure sustainable development.
Zhang Weizhong said: "The solution to this problem is the two sides of a coin. We need to achieve the requirements of sustainable and healthy development while also addressing customer needs. This requires financial institutions and regulatory authorities to move in the same direction and work side by side. Our goal is to solve problems facing the market and consumers."
Zhao Peng, President of China Life Insurance Company Limited, discussed another relationship: efficiency and fairness. He believes that financial institutions should grasp the difficulties of digital financial governance, balance efficiency and fairness, and let all groups share the good life brought by technology. While digital finance brings development opportunities, it also inevitably brings challenges. As far as insurance is concerned, the most prominent issue is the issue of ensuring fairness.
The basis of traditional insurance business is the law of large numbers, and insurance pricing is fair pricing for the general public, which reflects the risk-sharing nature of insurance, "everyone for me, I for everyone". In the digital age, with the popularization of Internet devices, the development of big data and the application of artificial intelligence, the risk identification ability of insurance companies will be greatly improved, and more accurate personalized pricing can be adopted to achieve "one thousand faces, one thousand risks for one thousand people".
Zhao Peng said that from a positive perspective, this will help improve the efficiency of insurance operations and thus increase insurance coverage. But its negative side also needs our attention. The negative side is that personalized insurance pricing based on big data and artificial intelligence may lead to excessively high premiums for some groups, making it impossible to transfer risks through insurance. This requires the industry to better grasp the relationship between digital financial innovation and governance, to fully utilize digital technology to improve service efficiency, and to prevent improper application of technology from affecting social fairness.
Song Shuguang, Chairman of China Export & Credit Insurance Corporation, said: "To promote digital financial innovation in a systematic and effective manner, financial institutions must first fully tap the value of data elements and realize the leap from data resources to data assets; second, use digital technology and digital thinking to reform and reshape the entire process of financial services, and then accelerate the establishment of a system and mechanism that adapts to rapid innovation in technological progress, so that innovation can be steady and long-term."
Wardle, CEO of Z/Yen Group, suggested that more innovation is needed, and skills, funding and finance are very important. The regulatory system must better adapt to and promote innovation, making innovation easier to achieve and ensuring that there is enough space in the market for new businesses and new ideas to emerge.
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