Interview with Liu Xinyi, President of Shanghai International Group: Giving full play to Shanghai's advantages and contributing "Shanghai power" to the development of global financial technology

In recent years, the penetration and evolution of technology in the financial field has greatly exceeded human expectations. In China, fintech is witnessing the transformation of Chinese manufacturing to Chinese intelligent manufacturing and Chinese wisdom, and promoting high-quality economic development. And Shanghai has preemptively stepped up on the track of financial technology.

In the latest edition of the Global Financial Centres Index in 2020, Shanghai International Financial Centre ranked among the top three in the world for the first time. In the fintech scoring chapter, Shanghai ranked in the top three for four consecutive periods.

After a continuous jump in the global ranking, how will Shanghai play to the accumulated advantages of financial technology? To become the world's leading fintech hub, where will Shanghai make efforts? How will the Shanghai Fintech Industry Alliance, initiated by Shanghai International Group, help build a FinTech Hub in Shanghai? With these questions in mind, during the second Shanghai Fintech International Forum, CBN exclusively interviewed Liu Xinyi, chairman of the Shanghai Fintech Industry Alliance and president of Shanghai International Group.

Shanghai's advantage on the track of the global fintech center

CBN: In the latest edition of the Global Financial Center Index, Shanghai International Financial Center ranked among the top three in the world for the first time. In the fintech scoring chapter, Shanghai ranked in the top three for four consecutive periods. What are the core advantages of Shanghai's development of financial technology?

Xinyi Liu: In the latest edition of the Global Financial Centres Index (GFCI) of the British think tank Z/Yen Group in September this year, Shanghai surpassed Tokyo to rank third in the world for the first time. The gap between Shanghai's comprehensive scores and the first place Inc. New York has been further narrowed, representing the continuous new progress in the construction of Shanghai's international financial center, and is increasingly affirmed and recognized by the global economic and financial circles.

Driven by the national strategy, after years of accumulation, the construction of Shanghai International Financial Center has made remarkable progress in the financial market system, financial institution system, financial service level, financial development environment, and two-way opening up of finance. The data shows that in 2019, more than 85% of the country's total direct financing came from the Shanghai financial market. The total trading volume of Shanghai's financial market this year is expected to exceed 200 trillion yuan. Shanghai-Hong Kong Stock Connect, Shanghai-London Stock Connect, Bond Connect and Gold International Board were launched in Shanghai. A shares have been included in the three major international indices of MSCI, FTSE Russell (FTSE) and S&P Dow Jones. As of the end of September this year, overseas institutions and individuals held a total of 7.9 trillion yuan in assets, more than double the 3.3 trillion yuan in early 2016.

Since the beginning of this year, the epidemic has not stopped the pace of financial opening up. A number of international financial giants have settled in Shanghai. On April 1, the restriction on foreign ownership of public fund companies was officially abolished. Subsequently, a group of the world's top asset management companies formally submitted an application for the establishment of a wholly-owned public fund management company in Shanghai. Up to now, 4 of the 8 foreign-controlled securities companies in China and 28 of the 30 wholly foreign-owned private securities investment fund managers have settled in Shanghai. A large number of foreign-funded financial institutions are actively preparing to set up wholly-owned or joint venture financial institutions in Shanghai.

Shanghai has a foundation and a foundation for the development of financial technology, and technology empowers finance with strength and space. A good financial foundation is an important soil for cultivating financial technology, and also provides demand and impetus for the development of financial technology. Overall, Shanghai's four advantages are more prominent. First, the financial factor market system has perfect functions, and financial technology enterprises have obtained perfect financial infrastructure support; second, the financial institution system is complete, providing rich application scenarios for financial technology enterprises; third, the financial legal system, financial talents, financial risk prevention and other aspects of the financial business environment continues to be optimized, providing all-round support for financial technology enterprises; fourth, it is located at the forefront of domestic financial opening to the outside world, the capital market has a high level of two-way opening up, and the "double cycle" strategic link function is increasingly enhanced. The strategies of many countries are superimposed and converged, and the environment for the development of financial technology is relatively superior.

In addition, Shanghai is located in the Yangtze River Delta Economic Belt, relying on the agglomeration effect of the Yangtze River Delta urban agglomeration, capital, talents, technology, industry and enterprises and other innovation elements are gathered; at the same time, the international financial center, science and technology innovation center and financial technology center have accelerated the linkage development, attracting and cultivating a number of important leading financial technology enterprises. These are all gratifying factors for the rapid development of the construction of Shanghai's financial technology center.

Striving to improve the realm and level of financial technology center construction

CBN: If Shanghai wants to become the world's leading financial technology center, what shortcomings need to be filled urgently? Where do you need to make efforts?

Liu Xinyi: The Proposal of the Central Committee of the Communist Party of China on Formulating the 14th Five-Year Plan for National Economic and Social Development and the Long-term Goals for 2035 adopted by the Fifth Plenary Session of the 19th Central Committee of the Communist Party of China proposes to "build an institutional mechanism for effective financial support of the real economy, enhance the level of financial technology, and enhance financial inclusion". Documents, including the central bank's Financial Technology (FinTech) Development Plan (2019-2021), have elevated the development of fintech to a national strategy. Financial technology has become an important support for finance to better serve the real economy.

The development of financial technology, just like the development of modern science, is inseparable from a three-dimensional architecture, including basic research, applied research and market-oriented technology development; inseparable from systematic evolution, all-round breakthroughs and phased focus; from peripheral support to core leading the transformation, from empowerment to energy and capacity evolution. With the development of 5G technology, the improvement of financial infrastructure and institutional systems, and the continuous development of smart cities, especially the strategic link function in the new development pattern, Shanghai firmly grasps the opportunity of a new round of scientific and technological revolution in the global financial technology pattern, continuously deepens its development in market-oriented technology development and applied research, and is focusing on seeking greater breakthroughs in basic research.

For the construction of Shanghai's financial technology center, it is necessary to consider the challenges from technology development, data application, business and ecology, customer experience, compliance and regulatory challenges, etc., and it is necessary to make breakthroughs in five aspects, which can be summarized as "five degrees", namely the maturity of technology, the combination of technology and business, the acceptance of customers, the integration of data inside and outside the industry, and the adaptability of supervision.

The first is the maturity of the technology. Fintech is technology-driven financial innovation. Technological development has its own originality, continuity, jumping and other characteristics, and the development of commercial purposes or business demands is the driving force for the recognition or commercial application of a technology, promoting technological innovation and upgrading. The rapid development of emerging technologies represented by edge computing, smart chips, and 5G+ Internet of Things provides underlying support for technological and financial innovation from the dimensions of computing power, algorithms, storage, and networks. Fintech is accelerating into the traditional financial industry in multi-dimensional, multi-level and multi-chain, constantly spawning new products, businesses and ecosystems. The maturity of the technology, the reliability of the business scenario application and the degree of value contribution are the most basic considerations.

The second is the combination of technology and business. Artificial intelligence, blockchain, cloud computing, big data, quantum computing, mobile Internet and other cutting-edge scientific and technological means, only by efficiently combining and landing with the business scenarios of financial institutions can we generate business value, optimize operational efficiency and cost, bring customers a better value experience, improve resource allocation efficiency and risk control level, and meet compliance and regulatory requirements. For example, after a customer enters a financial institution's premises, can technology quickly accurately profile and match its business strategy, transforming it from a target customer into a high-value business customer. This involves the digital transformation of financial institutions, the integration and innovation of technology, the matching of operation and maintenance capabilities, and also involves supporting business ethics and corresponding laws and policies.

The third is customer acceptance. Financial institutions use financial technology to produce personalized products with thousands of people through intelligent product design, which can increase product reachability, convenience and response speed, enrich online experience, deeply meet customer needs, and tap the potential of customer consumption needs. When it comes to factors such as changing customer spending habits and privacy security, customers will have different choices and different levels of acceptance. For example, biosecurity technologies such as iris recognition and face recognition may not be accepted by some customers. Some customers care about convenience, efficiency and effectiveness, and some customers are more concerned about data privacy protection and security features such as privacy transactions and privacy contracts.

The fourth is the degree of integration of data inside and outside the industry. For the first time, the data was added as a factor of production by the Fourth Plenary Session of the Nineteenth Central Committee of the Communist Party of China, which is a basic resource, a strategic resource and an important productive force. Commercial banks have a large amount of structured data, which can conduct credit identification on structured data such as the amount and number of purchases, but lack dynamic unstructured data. Platform companies such as e-commerce giants have specific shopping data and a large amount of non-structural data, and can use algorithms to identify shopping preferences, purchase motivations, real purchasing power, and give differentiated credit data and credit loans with different amounts. Financial institutions need to deepen the application of data resources and give full play to the multiplier role of data elements, and need to promote the integration of data inside and outside the industry. Carry out internal data governance, and do a good job in data grading and classification policies. Externally, it is necessary to clarify the ownership of data and realize the sharing and efficient application of data specifications. The integration and utilization of the company's internal data, industry data and related industry data requires the promotion and optimization of deep-seated changes in the fields of industrial ecology, business model and supervision methods.

Fifth, the adaptability of supervision. The rapid development of financial technology has profoundly changed the financial services ecosystem and greatly released the energy of financial services. While fintech improves service efficiency and financial accessibility, it also poses challenges to financial security and the public interest. While enhancing financial inclusion, fintech companies have not changed the nature of relying on credit and using leverage. To what extent can regulation embrace technological innovation? This raises the issue of matching regulation with technological innovation. For example, face recognition, in theory, the level of recognition of technology has been higher than the average level of labor, and the regulatory perspective must consider the occurrence of negative small probability events. At present, the supervision is striving to make a good balance in stimulating market vitality and avoiding risks, timely summarizing the pilot experience of China's financial technology "regulatory sandbox", and strengthening the coordination of financial supervision focusing on functional supervision and behavior supervision.

If Shanghai wants to make up for the shortcomings, it needs to continue to exert efforts on the above "five degrees" and constantly break through and improve. Finance embraces technology, financial technology embraces supervision, supervision continues to progress, with financial technology innovation to promote new products, new services, new models, new formats, new ecology, and constantly push the construction of Shanghai financial technology center to a new realm and level.

The mission and deeds of the alliance in the construction of Shanghai Fintech Center

CBN: In May this year, Shanghai International Group initiated the establishment of the Shanghai Fintech Industry Alliance, what are the current operational results? As the first municipal industrial alliance in the field of financial technology in Shanghai, how will it play a role in helping the construction of Shanghai financial technology center?

Liu Xinyi: As a cooperation mechanism for resource integration and win-win cooperation, industry alliances are widely used in all walks of life. The Shanghai Fintech Industry Alliance has three distinctive features. The first is to serve the construction of Shanghai international financial center. The construction of a financial technology center is an important part of the "6+1" pattern of Shanghai international financial center. The Alliance strives to build and improve the shanghai fintech industry ecology, build a technical cooperation and industrial promotion platform with an international perspective, and serve the high-quality development of Shanghai's fintech industry and the construction of Shanghai's international financial center. The second is the guidance of multiple official parties and the extensive participation of subjects. The alliance has formed an "8+49" pattern of guidance units, joint sponsors and member units, and achieved full coverage of elements in the field of financial technology in Shanghai. Eight regulatory agencies and government departments serve as the guiding units of the alliance, including the Shanghai headquarters of the central bank, the Shanghai supervision bureau of the Banking and Insurance Regulatory Commission, the Shanghai supervision bureau of the Securities Regulatory Commission, the municipal financial bureau, the municipal state-owned assets supervision and administration commission, the municipal economic and information commission, the municipal science and technology commission and the Hongkou district government. There are 49 member units of the Alliance, including 1 initiative initiator, 14 financial factor market units, 10 licensed financial institutions, 8 financial technology companies, 6 universities and research institutes, 4 new financial and financial technology subsidiaries, 5 functional institutions, and 1 secretary-general unit. Third, the content is rich and the forms are diverse. The Alliance has built a communication platform, display platform and innovation base for financial technology by building industrial parks, establishing joint laboratories, establishing innovation centers, displaying innovative achievements, releasing financial technology white papers, and holding industry summits and summit forums.

Giving full play to the role of the Alliance as a platform, hub and carrier in the financial technology industry ecosystem is an important work deployment of the municipal government, as well as the mission and focus of the Alliance itself. Since its establishment, the Alliance has focused on agglomeration, collaboration and innovation. Agglomeration is to bring together the strength of various institutions and talents in various fields to create an industrial agglomeration highland by optimizing services and improving supporting facilities; collaboration is to promote mutual cooperation and complementary advantages between industry regulators, participants and stakeholders around the financial service needs of market players, the application scenario needs of financial technology enterprises and the scientific and technological empowerment needs of financial institutions; innovation is to promote the formation of a financial technology source capacity cultivation mechanism, bringing together major research issues and breakthrough directions of financial technology. Actively participate in and take the initiative to carry out innovation pilots, accelerate the close integration of emerging technologies and application scenarios, and promote the innovation of financial technology sources.

Since its operation, the Shanghai Fintech Industry Alliance has begun to bear fruit. "Shanghai Chengchuang Fintech International Industrial Park", "Fintech Security Lab" and "Shanghai International Fintech Innovation Center" have been inaugurated and put into operation; the Shanghai headquarters of the People's Bank of China has released the Shanghai Fintech Innovation Supervision Pilot and announced the first batch of 8 pilot projects; released the "Shanghai Fintech White Paper (2019)", "Shanghai International Fintech Technology Innovation Topics" and other achievements; and prepared to set up a professional committee for industry applications and emerging technologies to promote the docking of fintech production and use Explore the formation of a long-term mechanism for regional cooperation in financial technology in the Yangtze River Delta, and prepare to hold the "Second Shanghai Fintech International Forum, the First Shanghai Fintech Innovation Expo and Global Fintech Festival (2020)" to further enhance the academic influence and internationalization level of the Alliance.

Promote the gathering of innovation bases by science and technology financial institutions. "Shanghai Chengchuang Fintech International Industrial Park" has attracted domestic and foreign licensed financial institutions, fintech enterprises, regulatory testing centers, relevant scientific research institutions and functional organizations to settle in, creating an industrial agglomeration highland and innovative application highland in the fintech industry, and becoming an important bearing area for Shanghai fintech center and global asset management center. An equal, mutually beneficial, cooperative and win-win fintech industry ecosystem is taking shape, and at the same time, a number of innovative and widely applied fintech demonstration projects are also incubating and growing under the joint care of various units.

Promote the implementation of pilot projects for financial technology innovation supervision. Since the launch of the Shanghai FinTech Innovation Supervision Pilot Project, a variety of entities, including various member units of the Alliance, have been encouraged to jointly participate in the declaration of regulatory pilot projects, and assist the central bank's Shanghai headquarters and other regulatory departments to complete the collection, publicity and expert demonstration of the first batch of innovation supervision pilot projects. At the same time, the reserve and screening of the second batch of pilot projects have also been launched.

Focus on the construction of a financial technology application demonstration zone. As a major initiative of the Alliance, the "Shanghai International Fintech Innovation Center" is the main position for the member units of the Alliance to display the achievements of financial technology development and innovation. Implement the "Joint Laboratory 50+50 Partnership Program", jointly build a joint research platform for financial technology, and cultivate a number of innovative and widely applicable financial technology demonstration projects.

Promote key laboratories such as the "Financial Technology Security Laboratory", start to prepare for the establishment of the "Financial Big Data Security Application Platform", and strive to upgrade to a national key laboratory. Focus on network security research and technological innovation, standard formulation, testing and evaluation, application demonstration and industrialization promotion and other service work, provide one-stop testing and certification and scientific research services for financial technology innovation and application projects, ensure digital transformation and integrated application security, and strive to form scale effects and benchmarking effects.

CBN: As one of the results of the alliance's participation, how do you evaluate the 8 application projects of the first batch of fintech innovation regulatory pilots in Shanghai? The regulatory sandbox is seen as an innovation in the fintech regulatory model. What are your thoughts and suggestions on fintech innovation and regulation?

Liu Xinyi: Fintech innovation is an efficient empowerment of the existing financial system. As a whole, it marks the progress, development and growth of the social financial system. But finance is always finance, and no matter what technical means fintech uses to innovate, it still solves financial problems. The development of financial technology still depends on finance and service finance. Therefore, fintech innovation must follow the laws of finance and comply with the rules of financial supervision. The attitude of the regulatory authorities to innovation has always been positive and prudent, especially in the innovation of financial technology, and the introduction of the "regulatory sandbox" is a manifestation of open attitude. At the same time, regulation must also maintain the bottom line of financial security.

In August this year, the Shanghai headquarters of the central bank announced the first batch of pilot applications of fintech innovation supervision in Shanghai, that is, the Shanghai version of the fintech "regulatory sandbox". Judging from the publicity, a total of 8 projects in the first batch were "shortlisted". The reporting entities cover state-owned large banks, joint-stock banks, urban commercial banks, private banks, bank card clearing institutions and other licensed financial institutions and related technology companies. In terms of technology application, the pilot projects focus on the application of cutting-edge technologies such as artificial intelligence, big data, blockchain, and multi-party secure computing in the fields of smart finance and inclusive finance, and are committed to improving the level of financial convenience services, improving the ability to prevent and control data risks, and alleviating the financing difficulties and expensive problems of small and micro enterprises. The "regulatory sandbox" mechanism and its beneficial practices of multi-party participants and the subsequent industrialization promotion of fintech projects are conducive to building a world-class fintech ecosystem and helping Shanghai become a fintech center with global influence.

CBN: In the future, how will the FinTech Industry Alliance help the construction of Shanghai International Financial Center and the construction of Shanghai Fintech Center, and what are the thoughts and prospects?

Liu Xinyi: Fintech is conducive to building a new financial service system and high-performance financial ecosystem, improving the commercial efficiency of financial enterprises, promoting internal business reform, and promoting the upgrading of regulatory efficiency. Occupying the highland of financial technology and increasing the supply of financial technology system has become the focus of competition of international financial centers, and it is also the meaning of the topic of building a financial technology center.

Specifically, we will further give play to the institutional highland effect of the superposition and convergence of multiple national strategies, make breakthroughs in the supply of policy innovation in terms of capital flow, innovative investment, talent introduction, products and services, and broaden the policy space for scientific and technological innovation and financial integration. The advantages of international financial centers will be further extended to the field of financial technology, bringing together the strength of financial supervision, financial services and financial research, strengthening cooperation and sharing, increasing capital investment in financial technology, deepening the application of financial science and technology achievements, strengthening the research and development of new technologies, new products and new standards of financial technology, and accelerating the construction of a leading domestic and internationally competitive financial technology center.

The vitality and display degree of the alliance lies in its positioning and characteristics, its mission and deeds, its self-expectations for the future, the deep understanding and breakthrough of the functions and space it carries, and the contributions and efforts of the member units of the alliance.

This year is the first year of the alliance. The future of the Alliance is long. Under the guidance of the alliance guidance unit, the member units of the alliance have actively participated in and made achievements in the alliance family, so that the development of the alliance has shown considerable results and gratifying weather. At present, the working mechanism of the Office of the Secretariat of the Alliance has been established, and the work of the Alliance is being carried out in an orderly and pragmatic manner with the strong support of the member units of the Alliance.

At the second meeting of the first session of the Alliance Council, Guo Mang, co-chairman of the Alliance and vice president of bank of Communications Co., Ltd., had in-depth thinking and specific guidance on the focus of the alliance's work. The development of the alliance should be good at doing good deeds and doing good deeds. First, we must look up at the sky, find the direction of the development of the alliance, and maintain the correct direction on the two fundamental issues of what kind of financial technology to develop and how to develop financial technology; the second is to look down at the road, make the alliance more grounded, understand the needs of the real economy, actively innovate financial products and services that fit the people's better life, and enhance financial inclusiveness through scientific and technological means; the third is to be down-to-earth, continuously enhance the influence of the alliance, and build the alliance into a Shanghai sample of open cooperation in the field of financial technology. It has formed Shanghai standards at the business and technical levels, played a demonstration role in the Yangtze River Delta and even China, and provided a useful reference for the development of financial technology in other regions.

Looking forward to the future, the Shanghai Fintech Industry Alliance will become an important driving force for the construction of Shanghai Fintech Center, and the functions and roles it carries will be greater. The first is to highlight Shanghai's leading role. Further enhance the integration of production, learning, research, investment and use, give full play to the unique advantages of Shanghai's financial industry and the abundant scientific and technological industry resources in the Yangtze River Delta, drive the integrated development of the Yangtze River Delta region, and promote the linkage development of international financial centers, science and technology innovation centers and financial technology centers. The second is to set a benchmark for opening up to the outside world. Promote the "introduction" and "going out" of technology and funds, enhance the internationalization level of Shanghai's financial technology industry, and further consolidate Shanghai's status as an international financial center. The third is to give play to the function of a new type of think tank, draw on the wisdom of society and the industry, enhance ideological innovation, policy influence and international output power, and become an important part of the soft power construction of Shanghai's international financial center.