DeFi: The next stop for digital banks?
Editor's Note: This article comes fromBabbitt Information (ID: bitcoin8btc), Author: Qiu Xiangyu, released with authorization.
Editor's Note: This article comes from
Babbitt Information (ID: bitcoin8btc)
Babbitt Information (ID: bitcoin8btc)
Digital banks are rapidly emerging.
On June 18, the Monetary Authority of Singapore (MAS) announced that out of 21 digital bank applications, 14 met the eligibility criteria required to consider applications. These qualified applicants will enter the next stage of evaluation.
The companies applying for licenses are all strong. For example, ByteDance, which recently released news, not only created national-level explosive products such as Douyin, Toutiao, and Xigua Video, but also had revenue of about 40 billion yuan in the first quarter, a year-on-year increase of 130%. Other companies involved directly or indirectly in the license competition include Tencent, Ant Financial, Xiaomi Group, Meituan Dianping, Didi Chuxing, Razer, etc. Only five of these companies will win in the end, and are expected to receive a digital banking license issued by Singapore by the end of 2020.
Today, the competition for digital banking licenses in Singapore is as hot as Hong Kong in 2018. At that time, a total of 29 institutions submitted license applications, including Ant Financial, Xiaomi, JD.com, Ctrip, Zhongan Technology, Ping An One Account Pass and so on. In the end, the Hong Kong Monetary Authority issued eight "virtual bank" licenses in 2019.
Why are digital banking licenses so hot?
Internet giants are vying for digital banking licenses in places such as Singapore and Hong Kong, which are strategically high places for fintech. Taking Hong Kong as a foothold can provide prerequisites for its development in the Guangdong-Hong Kong-Macao Greater Bay Area and the Asia-Pacific region. Singapore and China have frequent economic and trade exchanges and cooperation, which is conducive to Internet companies to expand their business overseas and export China's advanced technology to the outside world.
The deeper reason is that the irreversible trend of the digital economy era is coming to us, profoundly changing all walks of life. In particular, the outbreak of the epidemic has accelerated the digital transformation of many industries. Digital factories, online education, live e-commerce, unmanned retail, and a contactless economy are booming.
In the era of digital economy, digital banks are naturally required to provide a new model of financial services.
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Successful Practices of Digital Banking
Digital bank is a new term without a clear definition, and different regions have different names. For example, in mainland China, it is customary to call it an Internet bank, in Hong Kong it is called a virtual bank, and in Singapore it is called a digital bank.
The Hong Kong Monetary Authority defines a virtual bank as a bank that provides retail banking services through the Internet or other forms of electronic delivery channels rather than physical branches. The HKMA believes that the development of virtual banking can promote fintech and innovation in Hong Kong and provide banking customers with new experiences. In addition, since virtual banks generally target retail customers, including small and medium-sized enterprises, they help promote financial inclusion.
China's digital bank appeared in 2013, and Minsheng Bank took the lead in establishing a direct banking department in the country. Since then, private banks have emerged, some of which choose to operate purely online, which can be regarded as digital banks, such as MYbank, WeBank, and Xinwang Bank.
After five years of development, relying on their respective resource advantages, these digital banks have launched a series of innovative services for different industries and different groups of people, showing strong vitality.
The most representative of these is WeBank, which was established with Tencent as a shareholder. At the beginning of its establishment, WeBank adopted open source technology to build a distributed architecture technology platform, and successfully built a completely independent and controllable bank core system that can support hundreds of millions of customers and high concurrent transactions. Compared with traditional banking institutions, WeBank attaches great importance to technology research and development and application, and has continued to invest in cutting-edge financial technology fields such as artificial intelligence, blockchain, cloud computing, and big data, and has made good progress. Weizhongdai, the core product first launched by WeBank, makes full use of blockchain technology for reconciliation among cooperative banks, optimizing the efficiency of institutional reconciliation. In order to promote the blockchain to a wider public domain, WeBank participated in the construction of FISCO BCOS, a domestic fully open-source alliance blockchain underlying technology platform, and successively proposed the "public alliance chain" and "goodness" social governance frameworks, Explore a feasible path for the application of blockchain.
WeBank's annual report proves the strong development momentum of digital banks. From 2014 to 2019, WeBank's revenue increased from the initial 29 million yuan to 14.8 billion yuan, with an average annual compound growth rate of 248%. Net profit increased from 9.89 million yuan in 2014 to 3.95 billion yuan in 2019, with an average annual compound growth rate of 231%.
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The Next Stop for Digital Banking: DeFi
However, the pace of digital banks is still cautious, both in terms of business models and the use of advanced technologies.
From the digitalization of traditional banks to digital banks like WeBank, technological changes have not changed the essence of the bank's business, but rather have extended the bank's business to a broader and closer to the user scenario. For example, Weizhongdai of WeBank is embedded in the national APP WeChat, and users can apply for loans anytime, anywhere. MYbank's "MYBank Loan" relies on the e-commerce platform of the Alibaba Group to provide sellers with convenient loan services.
In the application of technology, even a digital bank like WeBank, which is at the forefront of innovation, is very cautious about technology such as blockchain. Except for Weiweidai, there are not many blockchain cases in the banking business. Applied disclosures. At the same time, the two virtual banks that have opened in Hong Kong, Airstar Bank and Zhongan Bank, did not mention the use of blockchain technology, but only used biometric account opening and big data assessment credit risk in financial technology technology.
Even so, human beings have gradually drifted away on the road to digital migration. Compared with digital banks that are more cautious in the real world, digital banks in another dimension of human society are moving faster, that is DeFi.
DeFi, short for Decentralized Finance, refers to the ecosystem of protocols, platforms, applications and tools reconstructed from the traditional financial system based on blockchain and other open source technologies. From a definition point of view, the traditional finance that DeFi targets also naturally includes banking business.
DeFi is a very bold attempt. Because the assets circulating in the digital bank are still the currency issued by the central bank, but in electronic form. However, most of the assets circulating in DeFi are Tokens issued by various blockchain systems. These Tokens are programmable and can control the issuance and circulation of assets through smart contracts. The digital bank has a strict KYC system, and the financial products provided above can only be used after the approval of the regulatory agency and the user meets a certain capital threshold. But DeFi is completely open, and anyone can create an account and use financial services freely.
This feature has attracted the attention of native players and Internet giants in the digital world.
At the "2019 World Blockchain Conference Wuzhen" hosted by Babbitt, Cai Yige, then general manager of Tencent's blockchain business, pointed out that virtual digital banks are a new channel for digital assets, and Tencent is actively preparing for them. He said that the possibility of integrating classical CeFi + DeFi will be an opportunity for new digital banks in the future.
He Bin, the founder of imToken, is more straightforward. He believes that DeFi is an expression of good intentions brought to mankind by technology geeks and project practitioners. DeFi and CeFi will eventually have a battle.
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Compared with digital banks, the supervision of DeFi is more difficult. This is because the original intention of DeFi is to promote unregulated and anti-censorship. However, with the recent frequent occurrence of DeFi security incidents, some people have begun to reflect on the supervision of DeFi.
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