In the afternoon of 14th June, Professor Chen Hui from MIT Sloan School of Management came to Fudan School of Management and gave a very inspiring lecture on financial innovation from an analytical perspective.
At the opening part, Professor Chen pointed out that there were dramatic changes in the structure of financial markets over the last decade in terms of mobile platform, data processing technology and regulation. Meanwhile, traditional financial institutions are greatly challenged as fintech innovations keep budding, such as digital payment, consumer finance, business financing and cyber currency.
Then what is fintech? Why is the concept so attractive?
Professor Chen explained fintech by starting with clarifying the “Fin” in fintech—which means finance. Fintech, by the literal name, solves financial problems. The inefficiency of the traditional financial system, e.g. imperfect completion, adverse selection, weak legal enforcement and lack of trust, give great opportunity for fintech companies to disrupt traditional financial institutions.
“But how can fintech add value?” Asked Professor Chen. He answered that fintech could collect information through various modern channels, treat data with complex algorithms and is able to generate additional data which make decisions on a more unbiased basis.
After elaborating the “Fin”, Chen continued to clarify the “Tech”. He explained that tech means big data technology. He took Zhima credit as an example of how big data technology underpins the credit system: how it collects data, assesses the risk of defaults, monitors borrowers’ economic behavior and updates the model.
By defining new datasets and running smarter algorithms, machine learning ability is established. Machine learning is the practice of using algorithms to parse data, learn from it and make a determination or prediction about something in the world. And it is the core of big data revolution.
By applying the big data technology, fintech companies are able to make data-driven decisions. To be specific, fintech companies would be able to predict the credibility of a borrower in advance so that they could significantly improve the credit performance.
With all the merits of big data technology, it also has limitations. For example, a wrong model could lead to completely wrong decisions. In addition, more data brings more noise which could reduce the chances for making right decisions.
Before Professor Chen wrapped up his lecture, he gave us some suggestions as to how to be involved in fintech.
To conclude, Professor Chen’s lecture crystalized a few questions as to what is fintech, how does big data technology fuel financial companies to create competitive advantages in the big data revolution.
Written by 2017 IMBA Fang Chao
June 15th, 2018
