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Observers say : In the self-organization mechanism, rooting in the cyberspace, the development of financial technology or Internet finance on the cloud platform will increasingly differ from the traditional finance that has grown up in the online environment, and its risk pattern is undergoing a fundamental change. The "long tail" feature caused by the power law distribution will lead to the extreme value distribution of financial risks and increase the volatility of financial markets.
Caixin columnist Zhao Wei
Ms. Wu Xiaoling divides financial technology into financial technology for financial activities and financial technology for financial services. According to this dichotomy, financial technology engaged in financial activities is a financial intermediary that functions as a financial intermediary, credit intermediary or transaction intermediary. The financial technology for financial services is pure financial service outsourcing or technical consulting and operation and maintenance services. Before discussing the risks of financial technology, such differences need to be made, and unless otherwise stated, “financial technology (company)†refers to financial technology (company) engaged in financial activities.
Since the essence of financial technology is financial intermediation and has problems of moral hazard and adverse selection, its micro-level risks are still the risks of traditional finance such as credit risk, market risk, operational risk and reputation risk, but because of financial technology With distinctive Internet technology features, such as low profit margin, light assets, high innovation, and scale (network effect), the risk of financial technology is not exactly the same as traditional finance, which mainly strengthens risks and changes the distribution of risks. .
Financial technology strengthens the inherent risks of finance
As mentioned above, the light assets of financial technology, that is, the characteristics of “light†capital, strengthen the high leverage of finance. Taking the third-party payment industry as an example, the leverage level of a representative online payment institution = (total assets - total liabilities) / total assets adjusted for customer reserve balances averaged 23 in 2009-2013, with a maximum of 29, the smallest The value is 13. The level of leverage in the banking industry must not exceed 17. Although the calculation method of the leverage ratio of the banking industry is more complicated, it may be inferred that the financial technology, especially the financial technology or Internet finance that actually bears financial risks, is faced with the thorny problem of capital adequacy. On the other hand, it is not difficult for us to understand that the Governor of the People’s Bank of China Zhou Xiaochuan pointed out that Internet finance “has a problem of the transition of shadow banking activities carried out. The leverage is too high and the capital requirements are different from traditional banksâ€.
Second, the low profit margin of the Internet has strengthened the balance between financial liquidity and profitability. The traditional method of controlling liquidity risk according to the law of large numbers will no longer be applicable to liquidity management under the condition of “long tail distributionâ€. At the same time, the financial knowledge, risk awareness and tolerance of “long tail†people are relatively lacking, which is more likely to appear. Individual irrationality and herd behavior, once there are risks, involving a large number of people, and a large impact, coupled with the lack of capital adequacy regulation, financial technology is more likely to produce outstanding solvency problems, resulting in greater default risk.
Third, the “high innovation†of the Internet is prone to more serious compliance risks and operational risks. As mentioned above, the early introduction of new products is an important means for financial technology or Internet finance to cross the "tipping point" of network effects. The introduction of the product first, may enable sub-optimal products to achieve the first-mover advantage in the competition to overcome other competing products, and even beat the best products. Financial technology or Internet finance companies have placed high emphasis on “trial and error innovationâ€, which has led to the introduction of some less mature products to the market, which is prone to serious operational risks and compliance issues, coupled with its “scale†network effect, even if not Mature products hide small risks, and are also prone to large-scale financial losses, thereby damaging the interests of consumers and creating sharp financial consumer protection issues.
Finally, the “upper scale†of the Internet directly strengthens the externalities of finance. Once a financial technology enterprise crosses the “tipping pointâ€, its supply and demand curve is reversed, that is, the demand function is tilted upwards, the supply function is tilted downward, and the unique advantages of increasing marginal returns and decreasing marginal costs are formed. The leading enterprises quickly become “ Systemically important institutions, even monopolizing the market, cause serious market fair competition. At the same time, because the “long tail people†are mostly vulnerable groups, the leading enterprises at this time are both “big but not down†and “too sensitive and cannot be invertedâ€, which not only threatens financial stability, but also may hinder social reform.
Financial technology is more prone to risk "black swan"
Financial technology and internet finance not only strengthen the inherent risks of finance, but also complicate risks and change the normality of risk distribution. As Nassim Nicholas Taleb pointed out in his best-selling book Black Swan: the Impact of Highly Improbable, the theoretical and realistic basis of traditional economic finance is a normal distribution or a Gaussian distribution. Management methodology is also based on this, but the extreme risk events in human society, economics, and financial history, or the Black Swan Event, are not in the theoretical framework of normal distribution. The normality of risk distribution is The normal distribution is transformed into an extreme value distribution, and even the power law (the most typical "long tail" distribution) makes the "black swan" event gradual, and the stability of economic and financial is seriously challenged.
Taking third-party payment as an example, the bank card acquiring business is the main form of traditional financial payment, and the online payment service is the main form of emerging financial payment. Through the sample data analysis, the daily transaction amount of the representative bank card acquirer is in a normal distribution, and the daily transaction amount of the representative network payment institution does not conform to the normal distribution, which is in line with the lognormal distribution, that is, the network payment. The daily transaction amount of the institution shows an obvious "long tail" feature, and its right tail is much more "long" than the normal distribution. Further, online payment is actually "easy" (more probable) than the traditional bank card acquiring business. An unusually large amount of transactions occurred. The terminology for conversion to risk management is that the value of the online payment (VaR) is larger than that of the traditional bank card, that is, the liquidity risk exposure of the online payment institution is larger than that of the traditional institution, and the network payment is The probability of extreme abnormality is greater than that of the traditional form.
Although this kind of data research is not as rigorous and comprehensive as empirical research, it still has a glimpse of the role of the whole leopard, that is, the development and growth of financial technology and internet finance, which is changing the distribution characteristics of financial risks, that is, from the normal distribution. The extreme value distribution is dominant. From a statistical point of view, the normal distribution is a gradual process and a stationary process. The extreme value distribution is a mutation (catastrophic) process and a stirring process, and the lognormal distribution is the intermediate state of the two distributions. It is believed that one or some of the many independent factors play a prominent role, but they do not reach the overall level.
In fact, authoritative research shows that in the natural, social and Internet space or cyberspace, highly clustered, unbalanced node distribution and central node structure are normal, that is, in the Internet space or cyber space, the equality between nodes It is an illusion. The cyberspace is essentially dominated by some highly linked central nodes, so that the normal distribution is not normal, and the power law distribution is the mainstream.
Therefore, in the self-organization mechanism, rooting in the cyberspace, the development of financial technology or Internet finance on the cloud platform will increasingly differ from the traditional finance that grew up in the online environment, and its risk form is undergoing a fundamental transformation, power law. The "long tail" characteristics caused by distribution will lead to the extreme value distribution of financial risks and increase the volatility of financial markets. (The author has used theoretical models to prove the volatility of financial markets in the context of Internet information dissemination and trading. It is proportional to the square of the network size). Moreover, with the complexity of the trading network formed by financial technology and internet finance, the identification of the risks and infective capabilities of a node is no longer as clear and direct as the traditional simple financial network. Therefore, the financial risk management system with the normal distribution as the basic methodology will no longer be applicable to financial technology or internet finance. â–
The author is a financial industry practitioner, deputy secretary general of the Center for Financial Innovation and Internet Finance Legal Research at China University of Political Science and Law.
Editor in charge: Jiang Fei
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