A Study on the Development of the Internet Finance Industry : Focused on the Finance Industry in China and United States

Abstract

The diversification of IT technology brought about by the Fourth Industrial Revolution is leading to tremendous changes in the financial industry. The epicenter of these changes is in countries with advanced traditional financial industries such as the United States and they are being carried out across the financial sector, in fields such as organizational structure, operating rules, and technical standards. This expansion of IT technology base centered on developed countries is surpassing the limitations of the traditional financial industry and expanding consumers' exposure to Internet finance. Along with the global trend, China's Internet finance industry is also developing rapidly. In order to analyze China's Internet financial market, it is necessary to investigate it in comparison with Internet financial markets in other countries so as to propose a new development path for Chinese finance. The United States was chosen as a point of comparison as it serves a good contrast to the Chinese model. Therefore, this study focuses on analyzing the differences in IT technology innovations between the two countries and between consumers in their choices and utilization of Internet finance. It is thus necessary to understand the development history of the Internet finance industry in both China and the United States. This study then divides the reasons for the differences into political factors, demand factors and technical factors for empirical analysis. The empirical analysis confirms that Chinese and American consumers are somewhat accepting of Internet finance while remaining concerned about its security. Interestingly, Chinese consumers are more accepting of Internet finance than American consumers, meaning that Chinese financial consumers are more actively using products and services through Internet finance companies than American financial consumers. Therefore, it is necessary for the Chinese government and financial companies to make policy efforts to encourage the use of products and services more actively by minimizing consumers' perceptions of the dangers of using Internet finance. Based on the above empirical analysis and conclusions, this research proposes the following policy measures for government and financial institutions to promote the sustainable development of China's Internet financial industry. The government should improve understanding of the role of supervision so it can be made more effective, especially in terms of foresight capabilities; it should promote financial innovation; protect the rights and interests of consumers, and adjust to a more flexible monetary policy. This study believes that commercial banks should abandon their resistance to Internet financial institutions, and adopt ways to accelerate Internetization, while Internet companies need to deepen their financialization. In the development process, commercial banks should focus on improving their own financial technology capabilities, optimizing their talent structure, giving play to traditional financial advantages, and comprehensively creating higher-quality financial products. Internet financial companies need to seek sustainable development, and in the future they need to transfer more services to the provision of technical services to existing financial institutions. In the development process, Internet finance companies should pay close attention to policy changes, focus on risk aversion, and continue to focus on small and micro customers. This research contributes to studies in this field by systematically classifying the development history of Internet finance in China and the United States, and analyzes the differences in the use of Internet finance between the two countries. However, the empirical analysis of this study has limitations in terms of simple variable setting and incomplete assumptions about consumers using Internet finance. It is particularly regrettable that a discussion of how the digital currency that was introduced by the Chinese government for the development of the Internet finance industry will affect consumers' financial use, is not included. Follow-up studies will seek to resolve these limitations.