-
Influence of Online Finance to
Traditional Finance
June 2014
Abstract
Online finance is a
financial intermediary activity carried out on the
internet. And it is made
up of online
securities, online bonds, and online insurance and
other financial sectors. The
main
features of internet finance like safe,
convenience, and swift have made it become a
prevailing trend in financial area.
Nowadays, Most of the enterprises are going to
focus their
market strategy on the internet domain.
Magnate industries in China, banks, are
establishing
new
businesses
such
as
Mobile
phone
banking,
and
Network
bank.
Meanwhile,
the
electronic
commerce
giants
like
Dingdong
Mall
and
Tao
Bao
have
made
a
significant
influence on
citizen?s daily life as well as the civil economic
environment. Last but not least,
the
third
party
platforms,
take
Ali
pay
as
an
example,
has
made
it
possible
to
increase
people?s
sense
of
safety.
Despite
the
fact
that
financial
service
online
has
brought
many
convenience for us, it also creates new
types of risks and adds new contents to financial
risk
management. To
achieve
the
sustainable development
of online finance,
great
importance
should be
attached to the risk control.
Key words:
online finance,
traditional finance, information, security
Influence of Online Finance to
TraditionalFinance
I.
Introduction
Since the 1990?s, one of the major
technological changes in international financial
sector is the
growing
popularity
of
online
finance.
Online
finance
is
a
financial
intermediary
activity
2
carried
out
on
the
internet
and
it
is
a
kind
of
financial
industry
reconstruction
and
innovation
based
on
the
internet,
computers
and
modern
communication
technologies.
Made
up
of
several
technologic
sectors,
online
finance
becomes
a
powerful
support
of
financial market, given
the traditional financial industry a huge hit. The
three main aspects
of the influences
are bank systems, the booming of e-business and
the arising of third party.
Nowadays,
with
the
development
of
internet
technology
and
the
prosperity
of
online
exchange, the
traditional financial trade off line has received
a huge hit by the active online
market.
Most
of
the
enterprises
are
going
to
focus
their
market
strategy
on
the
internet
domain.
Even
magnate
industries
in
China,
banks,
for
instance,
are
establishing
new
businesses
such
as
Mobile
phone
banking,
and
Network
bank.
Meanwhile,
the
electronic
commerce
giants
like
Dingdong
Mall
and
Tao
Bao
have
made
a
significant
influence
on
citizen?s daily life as
well as the civil economic environment. Last but
not least, the third
party platforms,
take Ali pay as
an example, has made it
possible to increase people?s sense
of
safety when shopping online, which is a mile stone
in China?s e
-commerce. Despite the
fact that financial service online has
brought many convenience for us, it also creates
new
types
of
risks
and
adds
new
contents
to
financial
risk
management.
To
achieve
the
sustainable development of online
finance, great importance should be attached to
the risk
control.
ture review
Since
the
1990?s,
one
of
the
major
technological
changes
in
international
financial
sectors
is
the
booming
of
on
line
finance.
Online
finance
is
a
financial
intermediary
activity
carried out on the internet and it is a kind of
financial industry reconstruction and
3
innovation
based
on
the
internet,
computers
and
modern
communication
technologies
(VanHoose,
2003).
For financial
institutions, online finance provide them with
advanced
business
processing
and
reduce
cost
of
financial
services
and
help
them
to
attract
more
customers
and
trading
opportunities
through
service
conveniences(Chang,
2002).
Internet
banking technologies allow them easier
access to financial services, cheaper bill-paying
and
time-saving in managing their
finances. Owing to the advantages for both
institutions and
customers, more and
more financial transactions are being conducted in
an electronic-only
format (Angelo,
2004; Kim, 2005). Chinese private online financial
organizations such as
Alibaba's
Yu'e
Bao
and
Tencent's
Licaitong
have
shaken
the
traditional
financial
markets
monopolized
by
state-owned
banks,
raising
250
billion
Yuan
in
just
seven
months
and
attracting over 10 billion Yuan in only
six working days. It comes as no surprise that in
the
era
of
data,
Despite
the
fact
that
financial
service
online
has
brought
much
convenience for us; it also creates new
types of risks and adds new contents to financial
risk
management. To achieve the
sustainable development of online finance,
great
importance
should be attached to the risk control.
III Influence of online finance to
traditional finance
3.1 The definition
of online finance
Online finance, as
well as e-finance, refers to financial activities
carried out over the
internet, it
mainly relies on payment via the Internet, cloud
computation, social networks,
search
engines
and
other
Internet
tools.
In
order
to
realize
functions
like
monetary
4
circulation,
financing,
payment
Internet
financial
is
not
simply
a
direct
combination
of
Internet and the financial sector, but
is based on the level of safety, such as mobile
network
technology
and
implementation
of
Firewall
Settings,
which
is
widely
accepted
by
users
familiar
with
the
application,
especially
for
those
enjoyed
in
the
electronic
commerce.
Naturally,
in
order
to
meet
the
new
demands
of
the
new
model
and
new
business,
the
combination of traditional financial
industry with the spirit of the Internet in the
emerging
field, is not just about the
difference between a financial business.
The
difference
between
traditional
finance
and
on-
line
finance
,
is
not
only
the
variance
of
intermediaries,
but
is
also
more
focused
on
the
financial
participants
understandings
of
an
“
openness,
equality,
cooperation
and
share
”
internet.
These
criterions,
t
through
the
Internet,
mobile
Internet
and
other
tools,
make
the
traditional
financial business
have
a higher transparency, participatory,
a collaborative, middle lower
cost, better is more convenient in
operation and a series of characteristics.
In
theory,
any
Internet
application
involved
in
a
broad
finance
should
be
called
Internet
finance,
including
but
not
limited
to
the
third
party
payment,
online
sales
of
financial
products,
credit
evaluation
audition,
financial
intermediaries
and
financial
e-commerce model.
Internet financial development has experienced
several stages from the
internet
bank,
third-party
payment,
and
personal
loans
to
corporate
financing.
And
it
is
doomed
that
it
will
take
an
increasingly
important
part
in
the
aspects
such
as
financing,
capital supply
and demand matching with both sides into the core
of the traditional financial
business.
3.2Features of online finance
5
There
are
totally
four
major
features
of
internet
finance:
promptness,
Immobilization,
Interaction and transparency, low cost.
3.2.1 Promptness
With the
wide and frequent use of
laptop , mobile phone ,their
characteristics of
convenient
for
carry, easy to operate make users able
to
enjoy the convenient
provided by internet
financial
services
anytime
and
anywhere.
Transformation
of
cash
and
the
realization
of
securities trading and other financial
functions make paying in a more and more fast and
in
a
timely
manner
possible,
only
by
pressing
a
button;
we
can
get
access
in
the
mobile
terminal,
etc.
At
the
same
time,
most
of
the
current
mobile
network
has
push
function,
which let more
customers obtain the information they want in a
much shorter possible time.
3.2.2 Immobilization
The
mobile trend reflects the financial development of
Internet. In 2007, the I Phone, with the
attitude
of
the
mobile
phone
opened
the
prelude
of
the
mobile
Internet
development
tide,
together
with
a
trend
of
mobile
Internet
sweeping
across
the
whole
world
with
the
extremely
sudden
and
swift
power.
The
most
popular
Android
mobile
operating system, by the end of March
2013, has reached a volume of 750 million units.
The
extension
of
the
mobile
Internet
is
gradually
from
PC
Internet
into
a
new
form
of
the
Internet,
subverting
the
traditional
Internet
mode.
In
a
word,
the
mobile
Internet
is
accelerating the development of the
Internet in the future.
3.2.3
Interaction and transparency
Typical
mobile Internet applications, such as weibo,
weixin and etc, enable customer to check
the financial information anytime and
anywhere. And it can realize direct communication
6
between
several parties. The mobile Internet will be an
important way for the user to obtain
financial information. And these are
definitely more and more transparent and open in
the
future.
3.2.4 Low cost
Mobile
Internet
make
financial
products
transactions
available
as
you
want,
reducing
transaction
costs
a
lot.
The
statistics
from
China
Internet
network
information
center
shows
the use of
online banking user scale up to 221 million RMB in
China by the end of
2012,
including
mobile
Internet
banking
user
scale
of
54.07
million;
users
of
online
payment scale up to 221 million, of
which 55.31 million mobile payment users.
3.3 Operating patterns of online
finance
Through communication,
computerization, electric network
and
other high technologies, it is
possible
for
finance
to
become
more
automatic
and
scientific
than
before.
The
financial
transactions turn
to be more effective, economy and efficiencies.
But in reality, there is no
significant change in the nature of
tradition finance.
Electronic bonds, electronic insurance
and on securities are the major
patterns of online finance transactions.
3.3.1 Online securities
Nowadays,
with
the
booming
of
free
market
economy,
people?s
attitudes
of
investing
have
changed
a
lot:
earning
money
is
important,
but
investing
and
financing
them
in
case
of
devaluation
can
be
far
more
important.
The
rapid
development
of
people?s
investing
activities in
stock and securities requires there must be more
stock exchange markets. And
for the
convenience of people trading, the online
securities become more popular, making it
possible that, no matter where you are
and what time you are looking for the information,
7
you can get
access to these as soon as possible.
Using
online
exchange
securities,
it
saves
time
and
money.
Just
click
our
mouse
and
all
information is available. If you do not
understand something, professors are online
waiting
to answer the questions 24, 7.
More to the point, there is no need to drive or
bike to the real
stock
exchange
place,
which
saves
time
and
energy,
even
people
at
work
can
do
their
investment freely as they want.
Meanwhile, for our nation, the earlier
we get attach to the international on line stock
exchange,
the
better
we
can
develop
a
fair
platform
and
pattern
for
investors
to
trade,
the
more
prosperous our nation economic will be.
3.3.2 Online insurance
Online insurance refers to the buying
and selling of insurance online. Insurance is
subject to the
principle
of
utmost
good
faith,
which
makes
it
convenient
for
people
to
conduct
the
business
online,
as
both
the
parties
have
absolute
duties
to
disclose
all
material
facts
otherwise any contract concluded is
void.
In
recent
times,
many
online
insurance
providers
now
provide
not
only
an
insurance
quote
online, but perform
the remainder of the selling process manually, and
takes a large amount
of
paperwork
out
of
the
process.
Some
international
insurance
companies
still
require
an
actual
physical process to take place.
In reality, both customers and
insurance companies can benefit from online
insurance products.
For customers, free
information online give them right to choose which
type of insurance
they would like to
buy, instead of listening to salesman?s
promotions. The services they can
enjoy
are more timely and thoroughly.
At the same time, Claims can be easier
than before.
8