In recent discussions surrounding the ever-evolving intersection of technology and finance, a significant emphasis has been placed on the advancements brought forth by artificial intelligence (AI). The financial sector, particularly, is undergoing a remarkable transformation as AI applications become more prevalentThis innovation is not merely an enhancement of services but a complete reimagining of how financial institutions operate, deliver services, and manage risks.

During the 2024 Zhongguancun Forum’s Fintech event, Li Mingxiao, the director of the Policy Research Department of the National Financial Regulatory Administration, spotlighted the progressive integration of AI technologies across various dimensions of digital financeThese applications are not just about improving operational efficiency; they are fundamentally shifting the paradigm towards smarter, more personalized financial services

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For instance, AI-driven customer service solutions can respond to clients’ inquiries in real-time, creating a seamless interaction that far surpasses traditional methods.

Moreover, Li highlighted that regulators are increasingly leveraging AI tools to identify risks, relationships among shareholders, and the flow of fundsThis utilization of technology is pivotal in enhancing supervisory efficiency, enabling a more dynamic regulatory landscapeThe management of financial institutions is encouraged to adopt AI-driven strategies for accelerating digital transformation while pushing banks and insurers to strengthen governance through digital meansThis approach fosters a more robust framework in which financial entities can operate, ultimately benefiting the overall market.

The impact of digital governance is particularly palpable in the realm of small and micro enterprises (SMEs). Through the lens of Zhejiang Rural Commercial Bank, we see a prime example of innovation tailored to meet specific market demands

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The bank has pioneered a unique “technology-enabled, digital lending” model designed to cater to SME needs, reinforcing the idea that technology can bridge gaps in service deliverabilityThe bank’s approach includes a comprehensive digital service chain that emphasizes meticulous mapping of client interactions, allowing for an increased understanding of business needs without the typical bureaucratic hurdles.

Moreover, the technological evolution in finance enhances the allocation of resources across various time frames, fundamentally improving the financial functionality of institutionsAs articulated by Wu Xiaoqiu, former vice president of Renmin University of China, the integration of advanced technology not only boosts credit risk assessment capabilities but also fosters inclusive financial developmentPayment and settlement efficiencies have notably improved, paving the way for a more agile financial ecosystem that can adapt to the shifting demands of consumers and businesses alike.

Data from the financial technology sector indicates that the landscape is burgeoning, particularly in Beijing where hundreds of fintech firms are pushing the envelope of innovation

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With over 1,800 fintech enterprises operating in the region, including 69 publicly listed entities, the dynamism of this market is readily apparentLocal government initiatives aim to create a leading hub for AI innovation, fostering an environment that encourages the practical applications of AI in areas such as smart customer service and automated loan approvals.

Examples of successful implementations are evident, such as those from Qifu Technology Co., which released its 2023 ESG report showcasing their frameworks designed for small business identification and sector reasoningBy harnessing deep learning and large language models, they significantly improved their capacity to provide financial services to SMEs, reflecting the effective blend of technology and finance in actionIn 2023 alone, Qifu facilitated approximately 160 billion yuan in credit support for SMEs, demonstrating a substantial commitment to improving access to finance for marginalized sectors.

However, as with any burgeoning technology, the integration of AI within the financial sector brings its challenges, particularly concerning security and trust

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Zhang Bo, an academician from the Chinese Academy of Sciences, pointed out that while AI can bolster financial service capabilities, it also introduces risks associated with uncontrollable outputs and trust issues that potentially compromise financial securityAs AI becomes more integrated into finance, the focus must shift towards mitigating these security concerns while leveraging China’s strengths in knowledge and algorithms to build a secure framework for fintech development.

Addressing these safety challenges, Lu Yong, the chief technology officer of Lexin, emphasized the need for ethical considerations in the massive deployment of generative AIIssues such as privacy violations and inadequate transparency must be addressed to protect consumer rights and ensure fair financial market practicesEstablishing stringent privacy protection laws, combined with algorithms that are highly interpretable and transparent, will be essential