THINK TANKSep 20, 2017

Andrew X. Tang: Interpreting Internet Finance

Nowadays people are getting more familiar with the term Internet Finance.

The rapid development of Internet Finance in recent years has largely influenced people’s way of living. At present, the Internet Finance is gradually forming and developing in to an industry, it does not only lubricant the Traditional Finance system, but also stimulate and bring more opportunities in to it. In order to gain a deeper understanding of Internet Finance, we need to separate Internet Finance in to two parts; Internet and Finance, and analyse them respectively.

The Internet refers to the integration of global information resources. The Internet changes our daily life from "three zero distance", which is the distance between people, the distance of information transmission, and the geographical distance. The Internet makes information transmission become more convenient and fast even with long distances, which has shortened the gap between people. Besides, the Internet does not only stimulate the development of information resources, but also strongly affects the financial sector and brought more profound impact to our daily life.

Finance, refers to the integration of banking, securities, insurance, funds, trusts, bonds and other financial institutions. When the Internet sector collided with the financial sector, a new industry came into being - Internet Finance. It is noticeable that the development of Internet Finance is based on two developed fields: The Internet and Finance.

The Internet is like the frame of an umbrella, stretching in all directions while finance as an umbrella cover is supported by the entire frame. The two parts are indispensable and support each other.

After understand Internet finance, we also need to explain the foundation of the Internet finance—the financial system. The system here is about the institutional issues based on the background of Internet financial industries. As the Internet is assimilated to the umbrella, finance is assimilated to the cover of the umbrella; Internet financial industry system could be considered as the handle of the umbrella.

No matter how strong the frame or the cover of the umbrella is, without a solid umbrella handle, the umbrella will soon be broken when one holds it up or add external forces on it. This situation applies to Internet financial industries as well; an Internet financial industry without support of a perfect regulation system will eventually emerge huge potential problems.

Those potential problems mainly refer to financial problems such as: illegal fund-raising, financial fraud, illegal absorption of public deposits and etc. At present, the development of Internet finance system is at the crossroads of structural reform. Although Internet finance brings full of great opportunities for development, but the Internet financial system is extremely lacking regulation. The establishment of a standardized and perfect Internet financial industry system is imperative to ensure the steadily grows of Internet finance.

The rise of Internet finance is the trend of the future, it will subvert the traditional financial development model; promote deeper development of Internet industries, accelerate the development of future financial system. China's future decade is the golden era of financial development, Internet finance is just in the beginning of the golden decade, so Internet finance has a further and larger potential. Of course, this rapid development of Internet finance requires a solid Internet financial industry system to support it. At the current moment, the rapid development of Internet finance is considered as a test of the Internet financial system, as well as an opportunity to develop further Internet financial enterprises. Internet, financial institutions and Internet financial system play a tripartite game, reforming the era of interests-gaming in the future decades.

Chief Executive Officer
Andrew D. Xiwen Tang
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