Financial innovation and governance have long been a topic of concern. The development of digital finance has brought new challenges to the balance between innovation and regulation. Under the background of building a digital financial powerhouse, how to simultaneously achieve the goal of improving quality and efficiency and preventing and controlling risks? How to improve the normalization of regulatory frameworks, and what are the difficulties in the development of regulatory technology in China?

At the "Plenary 7: Digital Financial Innovation and Governance" of the "2024 Lujiazui Forum" today, several executives from financial institutions stated that digital transformation is a systematic change in financial models. We should develop digital inclusive finance and use digital technology to provide affordable, more efficient, and safer financial services to the masses. When facing the balance between digital financial innovation and regulation, the industry believes that under the digital financial framework, balancing the relationship between finance, innovation, and regulation is a dynamic process.

Reshaping the services of financial institutions with digital technology.

Based on the strategic heights of building a financial powerhouse, the Central Financial Work Conference requires financial institutions to make great efforts in digital finance. How to implement this specifically?

Zhao Peng, President of PICC Group, suggested grasping the origin of digital finance development, the focus of digital insurance innovation, and the difficulties of digital financial governance. He pointed out that in terms of insurance supply-side, it is to play the role of the insurance industry as an economic shock absorber and social stabilizer to provide effective insurance protection for the development of the digital economy. In terms of insurance innovation, it is a top priority to reduce the overall risk level of the economy and society with technology as part of digital transformation.

Song Shuguang, Chairman of Sinosure, said that new technologies such as big data and artificial intelligence are evolving rapidly and data is progressively becoming a key driving force for economic and social development. The rapid development of the digital economy has put forward new and higher requirements for the allocation methods and efficiency of financial resources.

For financial institutions, Song Shuguang believes that first, it is necessary to fully tap the value of data elements and achieve a leap from data resources to data assets. Second, we need to use digital technology, promote digital thinking reform, and reshape the whole process of financial services, while accelerating the establishment of a system and mechanism that adapts to the rapid innovation of technology. Only through innovative development, can we achieve long-term stability and make progress.

Zhang Weizhong, Chairman of the Shanghai Pudong Development Bank, pointed out that China's total data production has reached 32ZB, with a total computing power ranking second in the world, indicating that the technological development of the digital economy in recent years has been very fast. He believes that data finance changes the service methods and business processes of financial institutions in terms of internal mechanisms. What is more important is that it will efficiently change the operation mode of finance in the future, such as credit loan products for technology startups, which will reconstruct the credit system of customers and rewrite the credit approval mode through the data system model of patent conversion and value assessment of intellectual property rights.

Difficult points and challenges in the governance of digital finance.

When facing the challenges of digital governance, Zhao Peng said that while digital finance presents development opportunities, it also inevitably brings challenges. Regarding insurance, the most prominent issue is how to ensure fairness. The principle of traditional insurance operation is the law of large numbers. However, in the digital era, more precise and personalized pricing can be adopted. "Personalized insurance pricing based on big data and artificial intelligence may cause high insurance premiums for vulnerable groups such as the elderly and disabled, who may not be able to transfer risks through insurance, thus creating new risk exclusion."

Zhao Peng pointed out that we should fully apply digital technology to improve service efficiency, while preventing improper application of technology from impacting social equity. We especially need to prevent discrimination caused by big data and algorithms, and address the financial needs of vulnerable groups through digital inclusive finance to ensure the effective allocation of financial resources.

Mike Wardle, CEO of Z/Yen Group, pointed out that the biggest challenge for regulation is dialogue with market entities. If regulators cannot get the latest information and risks of market subjects, it will be difficult to formulate frameworks.

Zhang Weizhong proposed that it is a dynamic process to balance the relationship between finance, innovation, and regulation. "Regulators must have a supportive and inclusive attitude towards innovation, and at the same time, establish rules and standards related to innovation. This is a dynamic process. Innovation is talked about more often, but it is not possible for every regulator to issue a decree before innovation, so it is a continuous process of improving regulations." Zhang Weizhong believes that in addition to regulators protecting consumer rights and interests between consumers and financial institutions, it is also necessary to protect users' privacy while speeding up the use of big data.