Time has come for financial innovation

Financial reform and innovation will substantially change the sector and create value for more people, but China should also guard against potential risks, participants said during a recent conference at Tongji University.

"Financial reform is a big challenge for China's leadership," Shi Jianxun, head of the Financial Research Institute of Tongji, told alumni and students of the university's School of Economics and Management, which was celebrating its 30th anniversary.

"But we have to accelerate financial reform because it is high time for China to fix problems in the sector and adapt it to the new economic conditions," Shi said.

"Failing to do it well can lead to a crisis that spills out of the sector and into society. It's also harder to make even small changes today because they touch upon vested interests of certain groups."

However, it is also the best time to carry out financial reform as innovation means everything is changing.

Ye Peng, vice president of Alibaba Group, said it is possible for almost anything to happen in an era featuring new ideas like big data, cloud computing, mobile Internet and Internet finance.

"It is a time of change," Ye said. "Possession, confirmation and shortage of things, typical in the old ear, are being replaced by the idea of sharing, dynamism and a surplus of information."

Every existing thing can be re-defined, he said.

For example, some people suggest ATMs print codes on all receipts in a bid to prevent certain crimes. But Ye said currencies in their physical form may disappear in the future, adding all transactions could one day be conducted online with a mobile phone, making information easy to trace.

Internet finance is another example of how innovation has no boundaries.

"It is already possible for small companies to borrow money from us without any collateral," Ye said. "We rely on their past record of online trading to decide whether and how much we should lend, and it only takes minutes to make that decision, which costs as low as 2 yuan (32 US cents)."

Hou Weidong, vice president and chief information officer of the Bank of Communications, said the rise of Internet finance did send a blow to traditional commercial banks.

"Traditional banks are under pressure," Hou said. "But competition and innovation are good for the market. They drive us to create more value and they fill in the gaps where some clients need to be served."

Internet finance has made it possible for people in remote areas to purchase high yield wealth-management products without going to a bank branch, which changes the broad picture of China's financial sector.