Professor Ben Shenglin, Dean of ZIBS,

I am very pleased to take part in today’s meeting at the Financial Street Forum in Beijing. My pleasure of participation is doubled as I am speaking on site instead of online participation as in the past during the COVID years.

Three weeks ago, the United Nations General Assembly had a two-day meeting on the Summit of the Future. Digital cooperation was treated prominently as one of the major items and the Global Digital Compact was attached as an appendix to the Pact of the Future. With the recent sudden development of artificial intelligence (AI), the financial sector may have to go through an unimaginable challenge and change in due course.

With the advent of Apple’s IPhone in 2007, smart phones began to influence the way people bank to shift towards more direct finance from the conventional way of indirect finance which often involves various intermediaries adding up to costs and inefficiencies. As of 2023, it is reported that 76% of the world and 60% of Chinese people make use of mobile phones.

With ever rising discredits on traditional banking sector in the aftermath of the 2007-08 global financial crisis as well as the acceleration of internet penetration, it has now come to a critical stage where fintech, for example, cannot but grow to become a threatening competitor to the banks.

Indeed, within a little more than 15 years of smart phones on the market, the banks are threatened as never before since the inception of Banca Monte dei Paschi di Siena in the Northern Italy in the last 15th century. We have to call this phenomenon as nothing but the revolution of the financial sector, the “First Financial Revolution.”Although I will not be speaking on the topic of central banks here, I think that the digitalisation of central banks is also very important and can be considered as a second financial revolution. I hope that China, as well as other central banks, will find better ways to cooperate.

While China and South Korea also did not participate to a greater extent in the first and second industrial revolutions, these two countries are now able to participate significantly in the third and fourth revolutions. So, digital finance breaks down long-standing barriers and opens doors to financial services for people who were previously underserved by them. Digital finance now encompasses a wide range of services, including payments, banking, insurance and wealth management, and the cumulative total transaction value of the global digital payments market is expected to reach $1.15 billion by 2024, growing at a CAGR of 18.4 per cent by 2018-2024.

Among several global financial transformation, China stands out as a remarkable case. It moved from a cash-based economy just two decades ago to become a digital finance powerhouse today. China has emerged as a global leader in key areas such as fintech, e-commerce and digital payment.

Firstly, digital payments have developed very rapidly over the past few decades, and China is leading the way in payment changes and has a lot of convergence digital intelligence, in terms of e-payments. Firstly, with the development of financial inclusion, digital payments and banking are soaring, and China is leading the way in the digital payments revolution. Digital solutions through integration into fintech and e-commerce platforms have changed the landscape and are having a big impact on traditional finance. Digital insurance, for example, has grown tremendously and uses a lot of AI technology. Above all, China has integrated a lot of technologies to enable the digital economy, for example, its middle class is growing so fast and it has a very good infrastructure and the world's largest 5G market, improving transaction speeds and application functionality, and 6G is proving to potentially make even more progress.

I must hasten to add that the development of digital finance, however, comes with various challenges. New types of financial exclusion such as digital divide and cybersecurity concerns persist alongside the need for more advanced regulatory frameworks, more careful consideration on green digital finance and more effective collaboration across sectors and borders.

I would like to more elaborate the above statements.

First, effective collaboration between the public and private sectors is vital for fostering innovation while ensuring regulatory safeguards. Authorities, financial institutions and tech firms need to strengthen public-private partnership(PPP) to develop a regulatory framework and to build capacity that promotes innovation and protects consumers.

Second, green digital finance can encourage more sustainable economic practices. By integrating eco-friendly principles into financial decision-making, digital platforms can promote sustainable behavior. For example, blockchain enables transparent carbon credit trading. Digital apps help users track and reduce their carbon footprints.

Third, the trade-off between innovation and safety can arise more frequently. Robust privacy and cybersecurity measures are critical for building consumer trust and safeguarding users.

By actively embracing innovative technologies and transformative business models, coupled with a well-balanced regulatory approach, the global digital finance landscape can continue to expand rapidly. Although currently limited mainly to retail finance, digital finance will play a role as a new engine of economic growth, helping to utilize resources more productively, foster economic equality, and ultimately contribute to broader socio-economic development.

Looking ahead, digitalization will gradually break down financial barriers across borders. Accordingly, the need to strengthen international cooperation on a regulatory framework is more essential than ever.

I sincerely hope that you enjoy the rest of this conference and benefit greatly from the wide range of prominent speakers who are gathered here today.