Artificial Intelligence (AI) and Its Financial Innovation in China’s Development

Artificial Intelligence (AI) and Its Financial Innovation in China’s Development

                                 

On December 14, 2017, the Ministry of Industry and Information Technology of the People's Republic of China publicized the "Three-Year Action Plan (2018-2020)"for promoting the development of a New Generation of Artificial Intelligence Industry. It proposed to take the integration of information technology and manufacturing technology as the main issue. The key points in “Three-Year Action Plan (2018-2020)" are to let AI becoming Industrialization and accelerate the construction of network from manufacturing. In fact, as early as 2015, the government in China has introduced a series of policies and applications of artificial intelligence not only for manufacturing industry but also for the financial industry.

About the application of AI’s technology in China in the beginning, we must firstly refer to “BATJ” in China, which are Baidu, Alibaba, Tencent, and Jingdong in sequence. The development of AI’s technology in China is mainly established from “BATJ”. And then the financial industry in China needs to acquire AI’s technology through “BATJ”. Table 1 shows that the layout of technology companies relative to AI in China for the financial industry. From Table 1, we can know that the application of AI’s technology in the financial industry must be cooperated with “BATJ” to provide better financial services. And another point from a policy perspective of government in China, Table 2 shows that the government started a series of policies on artificial intelligence beginning from mid-2015. With Table1 and Table2, we can understand that the development of AI in China is from the combination of Industry and Official simultaneously. Next, let's take an example from the AI’s application of the three major financial industries in China.

1.The Banking industry

From Internet finance to financial technology, the banking industry in China has been influenced by “BATJ”. Banks are introduced the advanced AI’s technology from BATJ, and the introduction of AI’s technology is changing the traditional concept of financial management and building so called "digital bank". At present, the digital finance in bank is mainly applied to the four aspects such as the access, opening up, risk control and operation. In addition, smart finance has also applied in business of bank. For example, Biometric authentication is used in customer platforms and Smart Advisor, which is investment advice from robot, is applied in deposit business. The application of AI’s technology in China’s bank as follows:

• Bank of China: Its artificial intelligence is used in the anti-money laundering verification project of the trade finance business. The anti-money laundering verification program of the trade finance business uses technology of artificial intelligence such as text analysis, image recognition and machine learning. Based on the bank's own customer and transaction data, the anti-money laundering verification program integrates with foreign trade websites, sanctions list, shipping companies, and news media data, whichs can be automatically identification and cross-validation by the price of goods, trading partners, cargo ship authenticity and other content. The final analysis report from anti-money laundering verification project is generated to provide the basis for the verification. After launching the anti-money laundering verification project, the original audit time for bank has dropped from 2 hours to just 2 minutes.
• China Everbright Bank: With "Wisdom Voice System", customers can send voice commands directly to their robots to inform their business needs through communication. For example, Customers can check credit card repayments and can apply credit card quota adjustments using "Wisdom Voice System”. Compared with the traditional voice customer service, "Wisdom Voice System “can save time, increase self-service efficiency, and improve user satisfaction.
• China Post: Guidance on package delivery in remote areas. "Drone Routes" can greatly reduce the distribution costs in remote areas, promote the development of rural electricity suppliers, and enhance the customer experience. In the future, it is also possible to use "Drone Routes" to create customized value-added services for high-end customers.

2.The security industry

In present, the smart finance has already begun to be applied to the four levels of the securities industry, especially the various types of application services such as smart advice, smart marketing, smart customer service, and smart risk control. The application of AI’s technology in securities as follows:

•  Ping An of China Securities: At the Ping An Group Simple Life Conference officially released "AI smart Stocks" service based on the customer’s risk appetite, profitability objectives, and style preferences. The system, through a series of intelligent algorithms and portfolio optimization model, can provide customers with the ultimate investment suggestion. In the smart stock selection, "AI smart stocks" has on the basis of technology of Big data and machine learning, which can improve the selection of stock from robot and provide short, medium, and long-term Investment advice.
•  Huatai Securities: For the marketing management demand of AI’s self-optimizing intelligent, the company has built a data-driven intelligent marketing platform for AI self-optimization. The company uses AI’s technology by integrating a large number of customers image labels and marketing strategies and combines various marketing channels to optimize the AI’s system. Through a series of process of AI’s self-optimizing, the employees of Huatai Securities make efficiency decisions in marketing because of AI’s assistance.

3.The insurance industry

Artificial intelligence enters the core business processes of insurance in China, from product design to pre-sales (consulting, recommendation, care), underwriting (certification and pricing), claims (anti-fraud, and after-sales service (customer service, daily analysis, CRM). At the same time, it also relies on artificial intelligence for marketing and risk control. On account of these smart applications, the insurance industry will reduce costs, increase efficiency, and promote the integration of the insurance ecosystem with other ecosystems. The application of smart finance in the insurance industry mainly include smart customer service, smart marketing, risk control, and construction of information platform. The application of AI’s technology in insurance as follows:

•  Face Recognition: Hongkang Life Insurance in China became the first insurance company to apply technology of artificial intelligence. It introduced the service of technology of face recognition.
• Smart underwriting: Through the questionnaire, the robot on internet in insurance company can understand the customer's health condition and give the insured person's permission to insure the "underwriting conclusion".
• The field In smart customer service like Ping An Life Insurance, through the introduction of online service platforms such as smart robots, video calls, and remote audits to meet need of all customer policy service.
• The multi-function robot: Tai kang Insurance Group in China launched the first insurance intelligent robot "TKer" on the Internet. It can use functions such as face recognition and voice interaction to realize the independent insurance, policy inquiries, business processing, human-computer collaboration and video publicity. It can also communicate with customers in a smart way. In the future, it will also combine health and sports wisdom hardware to measure body temperature, blood pressure, pulse, and other health services.

When government in China regards artificial intelligence as its national strategy, it is not difficult to see the impact of the application of artificial intelligence on the financial industry, not to mention the application in other industries and fields. Eric Schmidt, CEO of Google parent company Alphabet and the chairman of the Pentagon’s Defense Innovation Board, said the U.S. “needs to get our act together if it doesn’t want to fall behind on the technology that could determine the future of both the defense and commercial sectors.”

When China’s government fully implement the AI’s technology in industry, official, and university, I think the government in Taiwan should find a path based on its own long-established technology and then create a win-win situation cooperated and followed with government’s policy in China in order to gain a benefit.

(Table 1)

The layout of the financial industry in technology companies in China

Company	Focus on relative Issue	illustration
Baidu	Show that the concept of science and technology, Highlight the wisdom of artificial intelligence advantage.	Baidu Finance made seven layouts in AI FINTECH field, including Wisdom Customer Client, Identification, Big Data of Risk Control, Smart Investment, Smart Customer Service, Financial Cloud and Blockchain. The artificial intelligence, big data, cloud computing, and Blockchain are the core competitiveness of Baidu. Baidu cooperated with CITIC to build a bank to take advantage of technologies from cloud computing, artificial intelligence and mobile Internet ; Baidu also cooperated with insurance agencies to promote the integration of driverless car technology and insurance functions; Baidu also cooperated with Guizhou government in China to build financial brain Making it the first smart financing matching platform for small, medium and large-sized enterprises in China to open up the government, enterprises, financial institutions and network data. it also has layout by Baidu to build the face recognition, voice tests, OCR recognition, handwritten signature authentication and other security identity card authentication.
Alibaba	Open, AI, platform road, Ant Financial  dedicated to inclusive finance.	In October 2014, Ant Financial Services Group was formally established to focus on serving small and micro enterprises and ordinary consumers. It is an important part of Alibaba Group's businesses. The company is positioned as FINTECH with the theme of opening up AI and AI-driven all businesses. Since its inception, Ant Financial Group has taken the road to becoming a platform. It will open up the underlying platforms such as cloud computing, big data and credit system to promote the popularization of mobile financial services in tier-3 and tier-4 cities and rural areas, and to foster the development of inclusive finance. To pay as the center, the service of Ant Financial covers all business segments of finance and forms a comprehensive and interconnected financial ecology.
Tencent	Connect everything, co-symbiosis, create a financial open platform.	IOT become the main strategic goals for Tencent. At FINTECH, which includes mobile payments, wealth management and microfinance, Tencent uses AI to more accurately predict users' behavior in financial business, which will help provide the most suitable product for the most appropriate use of wealth and effective risk management. In 2015, the financial business structure built with TenPay was all included in the new payment platform and the line of financial application.
Jingdong	Use Jingdong Mall, layout of payment, consumer finance, supply chain finance.	In October 2013, Jingdong Financial Group was created and gradually established nine business segments of supply chain in consumer finance, wealth management, crowdfunding, securities, insurance, payment, FINTECH and rural finance. Jingdong is dedicated to financial device learning, deep learning, statistical computing, big data learning and other AI technology.

Source: 2017 中國智慧金融產業研究報告 億歐智庫 http://www.iyiou.com/intelligence

(Table II)

2015-2017 Government agencies in China release policies related to artificial intelligence

Time	Issued by Government Institution	Title of Policy or report	Content
2015/05	General Office of the State Council	Made in China 2025	Government will speed up the development of smart manufacturing product. The smart manufacturing will be the main direction in China. Government will accelerate the development of smart manufacturing equipment and products and will foster the process from manufacturing industry.
2015/07	General Office of the State Council	Guidance from the State Council on Actively Promoting "Internet +" Action	Foster the development of new industries in artificial intelligence, promote the innovation of smart products in key areas , and upgrade the intelligence level of end products.
2016/03	General Office of the State Council	Thirteen five-year plan	Mentioned in the outline of “Thirteen five-year plan” to encourage the development of new industries, smart transportation, precision medical, smart materials, and to encourage a new model of smart manufacturing industry.
2016/05	National Development and Reform Commission	"Network +" three years of artificial intelligence implementation of the program	By 2018, government in China will basically establish an industry system about artificial intelligence. The government will cultivate the talent relative to AI and create a huge market of AI.
2016/07	General Office of the State Council	Thirteen Five Year Plan for Science and Technology Innovation	Researching the artificial intelligence to support the development of smart industries, Government in next three years will focus on the development of artificial intelligence industry.
2016/09	National Development and Reform Commission	General Office of the State Development and Reform Commission, Organizing Committee to Declare "Special Proposal for the Innovation Capacity Building in the Internet + Area	In order to build an innovative network in the field of "Internet +" and to promote the development of artificial intelligence technology, government plan that artificial intelligence technology should be included in the special construction content.
2016/12	General Office of the State Council	Notice of the National Strategic Industrial Development Plan for the Thirteenth Five-year Plan	cultivate artificial intelligence and promote the application of artificial intelligence in key areas of economy and society in order to create a leading international technology system.
2017/01	General Office of the State Council	Opinions on Promoting the Healthy Development of Mobile Internet in an Orderly Way	Step up the deployment of key technologies such as artificial intelligence and virtual reality in emerging mobile networks and realize some cutting-edge technologies as soon as possible. Government in China hope that they can have a breakthrough in AI.
2017/03	General Office of the State Council	"2017 Government Work Report"	Accelerating and fostering the industries of artificial intelligence. It was also the first time for AI to include in the national government work report.
2017/04	Ministry of Culture	Guiding Opinions on Promoting Innovative Development of Digital Culture Industry	Government in China will deepen the "Internet +". Government will use Big data, Cloud Computing and Artificial Intelligence to support the effective connection between the innovation chain and the industrial chain.
2017/05	Ministry of Science and Technology	“Thirteen Five-Year Plan" for Biotechnology Innovation	Breakthrough in a new generation of technology of biological detection, brain science and brain-based on artificial intelligence.
2017/07	General Office of the State Council	A new generation of artificial intelligence development plan	formulating the strategic goal of AI in China: by 2030, the theory, technology and application of artificial intelligence have generally reached the leading standards in the world and become the world's major center of artificial intelligence; And in this report, to draw up 6 key points.
2017/12	Ministry of Information Industry	Three-year action plan to promote the development of a new generation of artificial intelligence industry (2018-2020)	Government in China will promote a deep integration of artificial intelligence and manufacturing to accelerate the process of building a strong nation in manufacturing and building a powerful nation on the Internet.

Source: 2017 中國智慧金融產業研究報告 億歐智庫 http://www.iyiou.com/intelligence 

Reference

1.工業和資訊化部，《促進新一代人工智慧產業發展三年行動計畫(2018-2020 年)》 http://www.miit.gov.cn/n1146290/n4388791/c5960863/content.html

2. 2017 中國大陸智慧金融產業研究報告。

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