Internet Finance:a Contest Of Financial Technology Transformation

The development of the financial is closely connected with the progress of information technology, from the early establishment of automatic clearing system to now day’s high-frequency trading with complex algorithm procedures,we can say, the innovation and application of information technology has been the financial sector, complete harmony throughout the whole of the financial development. Under the push of information technology, the development of the Internet financial has made great strides in recent years, and became a topic that cannot be ignored when discuss about the present situation and future development trend of finance development. In this background, more and more technology companies began to penetrate their business into the financial sector, which has caused wide public concern. Changes involved in the subjects of financial markets as well as innovative of financial channels, so that the financial sector in the market and competitive situation is changing, financial institutions and strategies in the competition means the performance of a new phenomenon, laws and characteristics, and also means the formation of a severe financial regulation regulatory challenges. They are scrambling on technical innovation of financial products, constantly create new financial concept and introduced the relative products to occupy the market. However, the risk associated with generating financial activities generate cannot be avoided. Upgrade technology can reduce the cost of risk aversion, but not able to completely eliminate the risk. The financial attributes Internet finance separate it with an ordinary Internet service, business strategy and rules of survival suitable for ordinary Internet companies cannot fully been adopted by the Internet financial companies. In addition, the Internet financial enterprises has the dual attributes of financial enterprises and high-tech enterprises, is not only the financial technology innovation, but also the business model innovation. The research thought on pure traditional financial institutions is no longer feasible, and the analysis and empirical analysis based on normative economics thinking is an important complement to the existing Internet financial research. This paper argues that, due to the existence of network effects, the trend of the development of the Internet financial competition is actually a "technical transformation" contest in financial industry, the race to compete for the user as the goal, and the final race results showed a "winner-take-all" characteristics:only a small number of top-ranking financial platform with large-scale users have the opportunity to further develop the business, using the technical advantages of the Internet to obtain profits, while most platforms will eventually lose market share out of the market. Therefore, in current initial stage of Internet financial, Internet financial firms will choose to invest heavily to enhance user stickiness through technological innovation, in order to expand their own user groups. From the perspective of game theory, this paper respectively simulated the technical innovation behavior of Internet financial enterprises in the condition of the symmetry and asymmetry, the analysis shows that Internet financial enterprise is working on a "war of attrition", and the cost and revenue issues such financial transformation pay is the root of the Internet financial enterprise risk lies.Specifically, traditional financing channels blocking and high financing costs exist in current China due to the lack of financial resources allocation efficiency, give internet financial firms an opportunity of existence and profit imagination, and it is also the biggest motivation for Internet financial enterprises to participate in the technical competition:the internet financial companies with more optimistic estimate of future development of internet finance, will invest more resources to participate in the competition. The whole industry input further stimulate investment in the Competition through its impact on the level of effort estimated size of the market. This feedback mechanism allows competition among enterprises conduct mutual encouragement, aggravated cruelty contest. As a result, under the current situation of the financial system is not perfect, some companies do not hesitate to use regulatory mode in the grey zone innovation in order to win in the competition, which could implied the larger financial risks. With the increase in the number of participants in the competition, the Internet financial firms compete for users is likely to turn to non-technical competitions, the enterprise will continue to turn the limited production resources in non-technical competition, is a waste of the social production resources. In addition, this paper also concluded that there are barriers to entry into the internet financial market, a firm may not be able to get the corresponding returns in the competition after paying effort and capital on this "technology Transformation contest". For the enterprise with lower production efficiency than a certain level, the optimal decision is quit the contest. By inference, in the transition from market cultivation period to maturity period, the internet financial industry will be faced with the reshuffle and restructuring. Smaller emerging Internet financial firms could be controlled by traditional Internet giant through strategic investments or mergers.Based on this, we believe that the existence of financial regulation will not become shackles of development of internet financial, on the contrary, reasonable and effective regulatory measures can provide a good environment for the Internet financial development. The last part of this article also made several recommendations, hoping to provide a useful reference and inspiration to promote the healthy development of China’s internet finance market.