AiBank's Architect Wu Yanjun: Effectiveness of Digital Transformation in the Financial Indus

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During a recent conversation, we discussed the fintech development with Mr. Wu Yanjun, a senior architect and head of the planning team of the Technology Management Department at CITIC aiBank. He shar

As one of the industries most receptive to technological advances, the financial industry has always incorporated various approaches to facilitate transaction convenience. Earlier this year, the central bank released the "Financial Technology Development Plan (2022-2025)" to guide and regulate fintech development. Throughout recent years, digitalization has introduced many changes to the financial services industry, and fintech is undoubtedly contributing to that change.

During a recent conversation, we discussed the fintech development with Mr. Wu Yanjun, a senior architect and head of the planning team of the Technology Management Department at CITIC aiBank. He shared his unique insights and experiences in training talent, as well as the challenges and opportunities faced by the financial industry due to digital transformation.

1. Promoting the wide adoption of digital technologies through policy support

Q: A term that has gained popularity in the technology community is "financial-level IT architecture". What kinds of scenarios can be considered as "financial-level," and what are the essential changes in financial-level IT architecture compared to traditional architecture?

A: A financial-level IT architecture is an IT architecture designed specifically for the financial industry. The financial sector is subject to a high level of regulation because it deals directly with money, which is vital to national livelihoods and the stability of the economy and society. Several requirements and restrictions must be taken into consideration when designing an IT architecture, including ensuring consistent accounts, providing financial services on a 24/7 basis, maintaining business continuity in the event of a natural disaster, and ensuring high levels of data security. As stated in the book "Financial-level IT Architecture," published by Zhejiang E-Commerce Bank(MyBank), unitary architecture and cloud-native architecture are the development directions for financial-level IT architecture.

Q: The central bank recently released the "Financial Technology Development Plan (2022-2025). What would you consider the keywords of this year's development plan? How will fintech develop throughout the year?

A: In 2019, the central bank issued the first phase of its fintech development plan, and the second phase was released earlier this year, which covers the 14th Five-Year Plan period. Rather than focusing on the infrastructure of digital technology in the first phase, the second phase emphasizes deep integration and deep application of digital technologies, data, and businesses. So digitalization seems to be the keyword of the second phase. In recent years, cloud computing, big data, and artificial intelligence have become widely used, and applications of the Internet of Things, 5G, blockchain, AR/VR will gradually mature and gain greater significance.

2. What are the difficulties associated with digital transformation?

Q: In light of the emergence of cloud computing, big data, the Internet of Things, artificial intelligence, blockchain, etc., what should banks and other similar organizations consider when they attempt to implement digital transformation strategies?

A: Traditional banking institutions should recognize the need to change; if they do not take the initiative to transform, they may be eliminated from the competitive market. Nearly all banks are increasingly moving toward online, digital, and intelligent systems; and if you take advantage of digitalization, you will be able to compete more effectively and achieve better results.

Q: In your opinion, what are the most challenging aspects of digital transformation in the banking and insurance sectors?

A: It is primarily the construction of digital organization and culture in the banking and insurance industry that poses the greatest difficulty to digital transformation. The more profound the transformation, the more difficult it is to transform people's mindsets. Digitalization will be superficial and unsustainable without the construction and transformation of digital organizations and cultures; and if the management team ceases to pay attention to the digitalization of the organization, it will gradually revert to its original model, and no long-term mechanism can be established.

Q: What is your view of the phenomenon of "doing the transformation only because eveybody says so"? Can anything be done to prevent such misunderstandings from happening in the future?

A: Digital transformation is increasingly being adopted by a variety of industries in China today. A significant number of enterprises are paying attention to digital transformation, which is a very positive development. However, there are also situations in which slogans are shouted loudly, but little is accomplished. Digital transformation can only be accomplished when we focus on building digital capacity, identify the short board of digital capabilities through realistic assessment, and build up the digital capacity practically. Meanwhile, we should find a reliable benchmark to measure the effectiveness of digital transformation.We would better focus on the market, implement digital transformation with customers at the center, and allow customers to evaluate the outcome of the transformation. e.g., China Merchants Bank uses the MAU (monthly active users) to assess its performance and efficiency.

3. Blue ocean strategy: digital transformation in action

Q: Which banks or enterprises are well-performed in terms of financial technology both domestically and internationally? Is there anything unique about them?

A: For domestic fintech organizations, we typically focus on traditional banks such as ICBC, CCB, and China Merchants Bank; and Internet banks such as WeBank and MYBank. As far as fintech companies are concerned, OneConnect Financial Technology Co., Ltd., and Alibaba Cloud are performing well.

As a state-controlled Internet bank, aiBank's rapid growth would not have been possible without the support of financial technology. As part of its mission to "create a smart bank with an ultimate experience and to build an open bank with an ecosystem of scene", aiBank utilizes various digital technologies, including cloud computing, big data, artificial intelligence, and blockchain.

Moreover, it has built solid middle platforms of business, data, and technology. Using cloud infrastructure, an agile R&D system, and a robust data security system, the company specializes in comprehensive technological innovations in consumer finance, industrial digital finance, wealth management, and financial markets. Through self-built channels and open banking platforms, the bank offers various convenient financial services to customers.

Cloud-based, agile, intelligent, and secure are the keywords that describe the financial technology of aiBank. For cloudization, aiBank has developed its own cloud-native financial system based on the financial cloud to develop its Internet financial business further. AiBank's financial cloud is 100% China-made, and 70% of its core technologies are independently controllable, making it the first cloud-based bank in China without using IBM's minicomputers, Oracle's databases, and EMC's storage products.

As for agility, AiBank's business development is based on its agile system. By 2020, aiBank had achieved a comprehensive level of technological agility with all tools and systems connected, all systems managed, and all technology resources managed.

In 2021, aiBank built a one-stop agile platform that would allow closed-loop management of all aspects of business, from business vision to R&D deployment to value analysis, in pursuit of efficient, collaborative, and compliant business agility.

Financial technology practice at aiBank has been widely recognized by the government, regulators, and the general public in recent years. AiBank has received several financial technology awards from the People's Bank of China and was named one of KPMG's "China Leading Fintech 50" for three consecutive years from 2019 to 2021. In addition, the bank is ranked 12th among the 2021 Global Top 100 Digital-only Banks Ranking by The Asian Banker, which is the third among Chinese Internet banks.

In addition, aiBank's Zhirong Inside Open Banking Platform Innovation Pilot Project was selected by the People's Bank of China as one of the first cohorts of fintech "Supervision Sandboxes". Besides, Zhirong Inside Open Banking Platform and Xingtu Big Data AI Marketing Middle Platform were awarded the third prize of the FinTech Development Award by PBoC.

Q: Could you please provide a brief overview of the current fintech ecosystem? In what direction is the next phase of development headed?

A: At this stage, the fintech ecosystem is dominated by three leading players: banks and bank-based fintech companies, traditional technology vendors, and Internet fintech companies. Each business type has its strengths. Bank-based companies are more business-oriented, Internet firms have a strong technical focus, and traditional technology vendors are capable of better productization.

Among all, it is difficult to predict the future of bank-based technology companies, as they are not part of the bank's core players. Therefore, practitioners will find it challenging to strike a balance between providing exemplary service to the parent bank and providing good service to the market.

Despite this, bank-based technology companies also have a number of advantages. They are leading in the process of being informationized and digitalizing many industries, with banks being at the forefront of technological advancement, business adaptability, regulatory compliance, and security at a financial level due to their advantage in these areas.

Q: In your opinion, what has caused this imbalance in the banking system? Why has the strategy changed so frequently?

A: Two factors contribute to the emergence of bank-based technology companies: first, after making substantial technological investments, they have accumulated a considerable amount of technological achievements and technological resources that can be output to earn revenue or generate some commercial benefit. A second case occurs in which, due to institutional reasons, the bank cannot provide the remuneration package for technology personnel on the market within the bank. Establishing a fintech company can create flexible mechanisms for maintaining a competitive fintech team for the bank.

In addition, bank-based technology companies that their parent bank does not support will be forced to test their competitiveness when they enter the market. There will be an elimination of the weak players from the market, and those who remain must find their own way to succeed. Currently, bank-based technology companies have just begun to develop, and the future looks bright.

4. Improve supporting mechanism for talent cultivation

Q: From a senior enterprise architect's perspective, what aspects do you think banks should prioritize in building new digital infrastructure?

A: The three components of building new digital infrastructure are building cloud-native architecture, home-made, and sustainability, which is in accordance with the strategy of peaking carbon emissions and reaching carbon neutrality.

Q: What are the main difficulties associated with promoting these three steps? What can be done to overcome them?

A: Cloud-native architectures include distributed microservice architectures, DevOps, containers, etc. First, cloud-native architectures provide a PaaS platform that helps developers lower technical barriers. The second point to be addressed is the importance of microservice splitting, not only for ensuring reasonable granularity but also for complying with the principle of high cohesion and low coupling, which requires repeated exploration and refinement. Finally, it is essential to focus on the service governance mechanisms, the development of a full-link tracking and detection mechanism, improving the observability of the entire architecture, and ensuring that problems can be quickly identified and resolved.

As for domestic production, the main objective is to determine the compatibility of existing systems with domestic hardware and software, to perform the targeted transformation, and, for new systems, to establish the hardware and software requirements from the beginning. Therefore, it is essential to strengthen the management of sectoral lists and the communication between industries because the infrastructure level at the underlying level is partial and many of them are related.

ESG has become a focal point of national and social attention in sustainable IT. Recently, the CBIRC issued the "Green Finance Guidelines for the Banking and Insurance Industry," and many financial institutions have released their annual ESG reports. Along with green financial business, banks should establish and renovate green data centers, adopt various green energy-saving technologies, and increase the use of renewable energy sources, enhancing the testing and management of energy consumption data.

Among the important indicators for this area is power usage effectiveness(PUE), which is a ratio that describes how efficiently a computer data center utilizes energy. More specifically, how much energy is used by the computing equipment. The total energy consumption of a data center includes the energy consumed by its IT equipment and its cooling, power distribution, and other systems. According to the "Financial Technology Development Plan (2022-2025), the People's Bank of China requires the PUE of new large data centers and mega data centers not to exceed 1.3, and by 2025, the PUE of data centers should generally not exceed 1.5. However, achieving this goal remains a challenge.

Q: In your opinion, what kind of support mechanism does fintech require at the management level? How should talent be nurtured?

A: For fintech companies, one of the most important things is to develop a scientific governance mechanism that enables the deep integration of business and technology. In order to ensure the effectiveness of technology and improve the ROI of technology, technology should be aligned with business and strategy. Furthermore, banks should achieve agile transformation through business and technology integration, enabling them to realize their digital transformation goals better.

The cultivation of talent should focus on both the internal training and external introduction to build a versatile team. For example, Bank of Jiangsu recruits 90% of its new employees as technology professionals and exports these workers to the business sector after a three-year training program, enabling them to learn both technology and business to meet the demands of financial technology and digitalization.

5. Opportunities and challenges: How can we avoid new risks?

Q: In light of the new mode of financial operation, how should banks deal with the new potential risk?

A: We need to pay attention to the new risks brought by digital transformation. In the central bank's new development plan and the CBIRC's guidance on digital transformation, many unknown risks are mentioned, such as ethical risks associated with models and algorithms, supply chain security risks caused by new technologies, and data security risks caused by personal information. Banks should continuously improve their risk management systems, covering all aspects, including systems, processes, and people, and constructing a three-line defense.

Q: What are the three lines of defense? Could you describe in detail how the bank prevents risks in different areas?

A: Regarding risk management, the first line of defense is the business operations department and the technology operations department; the second line of defense is the risk management department and the technology management department; and the third line of defense is the audit department. In light of the emergence of new types of risks associated with digital transformation, the technology department must be included in a comprehensive risk management system. Data security risks, for instance, require classification and grading of data, a different level of data security management, and a clarification of what data can be made available to customers or business partners for external use. A further example is the supply chain security risk, where the field or technology must ensure that more than two suppliers or open-sourced in order to avoid relying on a single partner.

Q: To conclude, what should banks do to successfully achieve "the second curve" of growth under the strong development of fintech?

A: Fintech development should focus first on developing the financial industry, using new technologies to help banks better handle credit intermediary functions, improve credit discovery, and provide more financial products and services that meet user needs. For example, industrial digitalization will become a new blue ocean for developing the digital economy in the next ten years. To contribute to industrial digitalization, banks need to integrate their services into various industrial chains and financial services into production and operation scenarios.

Meanwhile, fintech should serve as an essential part of the bank's ecological strategy, play a role in ecological construction, and empower ecological partners. In this way, the ecology can reciprocate with the financial industry to promote the development of the main financial business and fintech.

Guest Introduction


Mr. Wu Yanjun is the head of the planning team of CITIC AiBank Corporation Limited's Technology Management Department, a TOGAF accredited architect, an expert from the architecture localization working group of the Open Group in China, and a member of DAMA China. Having nearly 20 years of experience in fintech, he has conducted extensive research and practice in the field of digital transformation. A graduate of Peking University, Mr. Wu previously worked for a central financial enterprise, where he was responsible for leading the company's digital strategy planning, enterprise architecture design, and digital transformation.

责任编辑:庞桂玉 来源: 51CTO

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